2 of 5
BACK NEXT
Should you fill up on foreign?
Should you fill up on foreign?
Old style: They'll add a little flair to your portfolio.
New fad: You need more than a little. Overseas companies are core holdings.

You've probably always held a lot more in U.S. stocks than in foreign ones. That's sensible enough: Our country has long been the main driver of the world's growth.

But the economy beyond our borders boomed after 2002, and so did the stock markets. No surprise, then, that investors pumped more than three times as much cash into foreign-stock funds in 2007 as they did into domestics. Some top strategists, such as Pimco's Mohamed El-Erian, now argue that you should have half or more of your stock portfolio overseas. At this point, you might be flashing back to the vogue for Japan stocks in the 1980s, which ended in tears.

That's a reminder not to simply chase performance. But there's another lesson: Japan's investors would have been wise to diversify, and the same is true for you. The U.S. is expected to be just 10% of the global economy by 2050 - you'll be missing a lot if you keep too much money at home. Sure, our stock market will still be bigger and safer than most, but a foreign allocation of 20% to 40% of your stocks isn't wild.

In light of the performance streak, just avoid a big new bet all at once. Templeton's Mark Mobius, a veteran emerging markets manager, recommends small investments in regular increments.

The verdict: The globalists are right. Go abroad - but gradually.

NEXT: Bad bonds?

Last updated July 20 2008: 6:38 PM ET
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Special Offer

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.