Should you have any International Stock Exposure?

"Why would anyone want to invest in international stocks!?" some passionately exclaim. They're not wrong if you have been paying attention the past few years. But that's the past few years, what if we widened our gaze? Should we really be avoiding international stocks like the plague?

US Stocks vs International Stocks

1970 - 2021 / 11.1% vs 9.4%

1980 - 2021 / 12.3% vs 9.0%

1990 - 2021 / 10.8% vs 5.4%

2000 - 2021 / 7.5% vs 4.5%

2010 - 2021 / 15.2% vs 6.6%

SO... WHY OWN ANY INTERNATIONAL STOCKS?

Well, I actually think you can have a successful investment experience without owning any.

Now that I've provided the data and said that you're okay to go without to show off my integrity (so you'll trust me implicitly).... I'm going to use the rest of our time to convince you why you still might want to consider owning some.

WHICH WILL DO BETTER MOVING FORWARD... A COIN FLIP?

From 1970 through 2021 International Stocks outperformed US Stocks in 24 of the 52 calendar years. That is roughly 46% of the time. Almost... a coin flip with each calendar year.

outperformance tends to flip flop

1970 to 1976 - International Stocks did 12.6% while US Stocks did 3.2%.

1980 to 1988 - International Stocks outperformed in 6 of the 9 calendar years. International Stocks outperformed US Stocks by 6% over this time period.

1989 to 1998 - US Stocks outperformed in 8 of the 10 calendar years. US Stocks outperformed International Stocks by over 10% over this time period.

1999 to 2009 - International Stocks outperformed US Stocks in 8 of the 11 calendar years.

2010 to 2021 - US Stocks outperformed International Stocks in 10 of the 12 calendar years.

US STOCKS ARE EXPENSIVE

The share price of a publicly traded company (or stock) is often anchored to the earnings of that company. Sometimes the share price and earnings of the company get a little out of wack. High share price and low earnings can mean that company is expensive to purchase based on the earnings that company is producing. Low share price and high earnings can mean the opposite.

Now for my point.

In 1990, US Stock valuations were HALF of International Stock valuations (International Stocks were more expensive to purchase than US Stocks, assuming companies had the same earnings).

At the end of 2022, US Stock valuations were 1.5 times International Stock valuations.

Great... What does the paragraph above even mean?

It means US Stocks have become much more expensive over the years because everyone wants to own them. Might their be an opportunity to take advantage of some reasonably priced international stocks? Or, at the very least, carve out a small portion of your portfolio for some international stock exposure?

I'll let you decide.

Sources & Disclosures found in the video link on Youtube