Who needs foreign? You, probably. Maybe you’ve read Bunk 43 and know non-US stocks as a category shouldn’t be inherently more or less risky than US stocks and, long term, should net pretty similar returns. So if they aren’t more (or less) risky, and returns should be similar (long term), why bother? Two reasons:
1. Risk management
2. Return opportunities
Yes, in the very long term, US and non-US stocks should have very similar returns (and actually have had throughout well-measured history). But for many years at a crack—maybe three to seven, but sometimes more and sometimes less, one category can best the other—just like with all other categories like growth versus value, or big cap versus small cap, or Tech versus Energy. (Bunk 10.)
Figure 44.1 shows the S&P 500 performance divided by the MSCI EAFE Index. When the line is rising, US stocks are overall outperforming non-US (also shaded in gray). When the line is falling (white bars), non-US stocks are outperforming. You intuitively see that the white and gray, rising and falling, almost exactly equal each other. But for years at a crack they don’t.

US and Non-US Trade Leadership—Irregularly

Since 1970, US and non-US stocks have traded leadership irregularly for irregular periods. Sometimes US stocks outperform by a lot for a long time—like in the mid to late 1990s when they led EAFE by 193.5 percent.2
Figure 44.1 S&P 500 Versus MSCI EAFE—Sometimes US Leads, Sometimes US Lags
Source: Thomson Reuters, ...

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