• Dr. Andreas Lawson Ph.D.

"How much do I have invested in international funds?"

It may be less than you think...

I was asked to look at a 401K portfolio today. My goal was to determine what percentage of the portfolio was allocated to U.S. stocks and what percentage was allocated to international stocks. This is an important question, because an investor really needs to get the balance between U.S. and international stocks right.[1] Here’s the portfolio:

40% is in the Vanguard 500 Stock Index Fund 20% is in the American Funds New Perspective International Stock Fund 40% is in Vanguard Intermediate Bond Fund

It's easy to see 60% of the portfolio is allocated to stocks and 40% to bonds.

But how much is invested in U.S. stocks and how much in international stocks? 40% to U.S. and 20% to international?

No. In fact, about 50% of the total portfolio is invested in U.S. stocks and only 9% in international stocks.

Why? Because the American Funds New Perspective International Stock Fund contains about 51% U.S. stocks & 43% FOREIGN stocks (and 6% cash).

The punchline is to evaluate the holdings of the funds you use for international exposure carefully. They may give you less international exposure than you think.

And by the way, the portfolio above does not have anywhere near enough international stock exposure for most investment goals and investment horizons.

Freshfield's Position

We carefully evaluate the holdings of each fund we use to build a client's portfolio to ensure the portfolio has the correct balance between U.S. and foreign stocks and bonds.

[1] https://www.freshfieldinvestments.com/post/should-i-invest-internationally

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