Stock asset allocation for non-US investors
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Within their stock allocation every investor needs to make a number of decisions: - What regional allocation will I adhere to? Do I want global diversification? do I overweight one region? do I overweight my region and introduce a home-bias?
Worldwide or overweighting a region/country
One of Boglehead Principles is to Bogleheads®_investment_philosophy#Diversify Diversify. The principle mentions that rather than trying to pick the specific securities or sub-asset classes of the market that will outperform in the future, Bogleheads buy funds that are widely diversified, or even approximate the whole market.
- Owning the worldwide stock market would mean to own Large cap, mid cap and small cap of the developed and emerging markets, covering about 98% of the worldwide stock market. This might be difficult as this might require a more complex and more expensive portfolio of multiple funds. Hence sometimes a simpler portfolio is sufficient:
- Large cap and mid cap of the developed markets : covers about 75% of the wordlwide stock market
- Large cap and mid cap of the developed and emerging markets : covers about 85% of the worldwide stock market and might be achieved with one or two funds.
- Home Bias : overweight your country or region
- Overweighting the US market: Many US Bogleheads overweight the US stock market. This might also be a strategy for the non-US investors
Variations on Boglehead Investing
Next to the mainstream
- Adding and overweigthing of REITs
- Adding more asset classes to a portfolio : gold, commodities, ... various sub-asset classes of bonds
- Tilt to value and small cap
- Slicing and dicing the market and overweigthing some of them
- John Norstad, The Arguments for Investing in Total Markets