are international stocks worth it? Comprehensive Guide

Are international stocks worth it?

Are international stocks worth it is a common question for investors building a diversified portfolio. This article explains what "international stocks" means, summarizes the main arguments for and against owning them, reviews historical performance and recent trends, and gives evidence-based, practical guidance on implementation, sizing, and monitoring. Readers will get a neutral, beginner-friendly roadmap to evaluate whether and how international stocks might fit into their portfolios — plus a short checklist to act on next.

Definition and scope

"International stocks" refers to equities issued by companies incorporated and primarily operating outside the United States. When answering are international stocks worth it, it helps to break the concept into clearer parts:

• Developed markets: large, regulated markets such as Japan, the United Kingdom, continental Europe, Canada, Australia, etc.
• Emerging markets: higher-growth but generally higher-volatility markets such as China, India, Brazil, South Korea, South Africa, and others.

Common instruments to access international stocks:

• Local-listed shares (bought on the local exchange via international brokerage access)
• ADRs/GDRs (American or global depository receipts listed on U.S. exchanges)
• ETFs (broad ex-U.S., regional, country, or strategy ETFs)
• International mutual funds (index or actively managed)
• Direct investment via international brokerage or, increasingly, tokenized securities and institutional platforms

Throughout this article, "international" and "ex‑U.S." are used interchangeably unless specified. When discussing portfolio construction, we separate developed ex‑U.S. and emerging markets because they behave differently.

Historical performance and recent trends

When investors ask are international stocks worth it, they often mean "have international stocks historically added return or diversification relative to U.S. equities?" The long story is:

• Over the last few decades the U.S. equity market (particularly large-cap growth and mega-cap technology names) delivered outsized returns versus many international markets. This multi‑decade U.S. outperformance is widely documented by major research providers.
• There have been extended multi‑year stretches when international or emerging markets led — for example, past commodity cycles, regional rebounds, or periods when the U.S. dollar weakened.

As of Jan 15, 2026, according to Morningstar research, long-run global data show the U.S. has outperformed many foreign markets on a trailing multi‑decade basis, but cross‑period variation is large and valuation gaps remain a useful explanatory factor.

Notably, investors saw a material international surge in parts of 2024–2026 as several non‑U.S. markets rotated from laggards to leaders in certain months. As of Apr 2025, large institutional initiatives around settlement efficiency (for example, a DTCC tokenization roadmap reported in April 2025) and improved institutional access helped trading and liquidity in some international segments, though retail access and implementation frictions still vary by region.

Key takeaway: historical underperformance of many international markets relative to the U.S. does not mean they are never "worth it" — timing, valuation, currency, and sector cycles all matter.

Why investors consider international stocks

Investors include international stocks for several well‑established reasons:

• Diversification benefits: International stocks broaden the opportunity set beyond U.S. market concentration. Different economic cycles, policy regimes, and sector mixes can lower portfolio volatility over time.
• Access to sectors and companies underrepresented in the U.S.: Examples include global financials in some regions, resource and commodity producers, certain industrials, and domestically focused consumer franchises.
• Valuation opportunities: At times, non‑U.S. markets trade at lower valuations than U.S. counterparts, offering potential mean‑reversion opportunities as studied by Vanguard, Fidelity, and Morningstar.
• Currency exposure: Currency movements can add returns (when local currencies strengthen versus the U.S. dollar) or act as a hedge if U.S. growth slows.

Collectively, these motives explain why many global asset allocators maintain non‑U.S. exposure even after long U.S. outperformance.

Arguments against heavy international exposure

Opposing viewpoints are also common when debating are international stocks worth it:

• Home‑country bias rationale: Many investors prefer domestic equities to avoid currency risk and to invest in companies they understand.
• Foreign exposure via U.S. multinationals: Large U.S. multinational companies earn significant foreign revenues, giving some U.S. investors indirect international exposure without buying foreign shares.
• Rising correlations: Globalization and synchronized risk episodes can increase cross‑market correlations, reducing apparent diversification during crises.
• Transaction and implementation frictions: Taxes, dividend withholding, trading spreads, and differing settlement rules raise costs for some investors.
• Historical underperformance vs. the U.S.: For long periods, U.S. equities have outperformed, making a high allocation to international assets look costly in hindsight.

These counterarguments support a measured approach rather than an all‑in position away from U.S. equities.

Key drivers that affect international vs U.S. returns

Several principal drivers determine relative performance between international equities and U.S. equities:

• Valuation differentials: Price-to‑earnings, price-to‑book and other valuation metrics often explain part of subsequent returns via mean reversion.
• Currency movements: Dollar strength typically depresses U.S. dollar returns for unhedged international investors; dollar weakness tends to boost them.
• Sector composition: The U.S. market has heavy concentration in technology and growth; markets with larger commodity or financial exposures will diverge when those sectors move.
• Local economic and political developments: Growth, interest rates, fiscal stimulus, and reforms materially influence returns.
• Global risk sentiment: Risk‑on and risk‑off cycles can synchronize markets or amplify regional differences.

Understanding these drivers helps set expectations for when international stocks may outperform or lag.

Risk considerations specific to international equities

International stocks bring specific risks that investors should assess:

• Currency risk: Two types — translation risk (reported returns in investor currency) and economic risk (exchange rate effects on company competitiveness). Currency hedging is an option but comes with costs.
• Country and political risk: Changes in regulation, taxation, nationalization risk, or geopolitical strains can affect returns and liquidity.
• Corporate governance and disclosure standards: Some markets have weaker minority shareholder protections or less transparent reporting.
• Liquidity and market structure: Smaller exchanges or thinly traded securities can widen spreads and raise execution costs.
• Emerging‑market volatility: Emerging markets typically show higher nominal and drawdown volatility than developed markets.
• Tax and withholding rules: Dividend withholding and foreign tax credits vary by country and investor domicile.

These risks argue for careful vehicle selection, position sizing, and an understanding of tax consequences before adding international exposure.

How international stocks affect portfolio construction

When investors ask are international stocks worth it, the portfolio lens clarifies tradeoffs: adding international exposure changes the portfolio’s correlation structure, expected return, and volatility.

• Correlation and diversification: Even if correlations have risen, international exposure often reduces long‑run portfolio volatility and can improve risk‑adjusted returns because of different sector and economic drivers.
• Impact on expected returns: If non‑U.S. markets trade at lower valuations, they may offer higher expected returns on a forward basis; conversely, overvalued markets may reduce future expected returns.
• Sizing approaches: Common approaches are market‑cap neutral (global market‑cap weights), home‑bias reduced (e.g., 20–40% international for many U.S. investors), or tactical tilts based on valuations/currency views.
• Strategic vs tactical role: International stocks often serve a strategic diversification role but can be tactically overweighted when valuation or macro indicators favor them.

Developed markets vs emerging markets

Developed and emerging markets differ in key ways:

• Volatility: Emerging markets usually show higher volatility and deeper drawdowns.
• Correlation with U.S.: Emerging markets may be less correlated with the U.S. at times, offering distinct diversification, but they can also sell off sharply in global risk aversion episodes.
• Return expectations: Emerging markets historically have higher expected returns (risk premium) but also higher idiosyncratic risk.
• Use cases: Developed ex‑U.S. exposure is often used for broad diversification and access to mature companies; emerging markets are used for higher-growth tilts with a smaller allocation and longer time horizon.

When international stocks are more likely to outperform

Historically, international stocks have outperformed the U.S. in several scenarios:

• Weak U.S. dollar: A falling dollar lifts unhedged foreign returns in dollar terms.
• Valuation catch‑up: When U.S. valuations are historically rich and foreign valuations cheap, mean reversion can favor international markets.
• Commodity and cycle rotations: Commodity price rallies can drive outperformance in resource‑heavy markets.
• Local policy stimulus or corporate reform: Structural reforms, stimulus, or fiscal expansion in a region can outpace U.S. growth.
• Sector rotation away from U.S. mega‑caps: If global non‑U.S. sectors (e.g., financials, industrials) outperform, international markets benefit.

No signal is perfect, but these historical relationships help form a tactical view.

Implementation: vehicles and strategies

There are several practical ways to gain international exposure. Each has different cost, tax, and tracking characteristics.

• Broad global ETFs: Invests worldwide including U.S.; good for full global market exposure.
• Ex‑U.S. ETFs: Track international market indexes excluding the U.S.; simple and low‑cost for ex‑U.S. exposure.
• Regional and country ETFs: Offer focus on Europe, Japan, Asia, or single countries, useful for tactical bets.
• ADRs/GDRs: Individual foreign companies listed on U.S. exchanges; convenient but less diversified.
• Active funds: Managers can add value in less efficient markets (smaller countries, EM), but fees and manager risk apply.
• Specialized strategies: Value, small‑cap non‑U.S., sector funds, or factor ETFs for targeted tilts.

Hedged vs unhedged currency exposure

When buying international ETFs/funds, investors choose between currency‑hedged and unhedged versions:

• Currency‑hedged funds remove most short‑term currency swings and may suit investors who only want equity risk.
• Unhedged funds give both equity and currency exposure; over long horizons currency can be a return source.

The optimal choice depends on horizon, views on currency, and cost of hedging.

Passive vs active management abroad

Tradeoffs:

• Passive: Low cost, transparent, and wide coverage. Useful for developed markets and large emerging markets where index exposure is available.
• Active: Potential advantage in inefficiencies (small cap, frontier markets, local listing complexities). Active managers may add value in emerging markets or niche strategies but require due diligence and have higher fees.

Alpha Architect and other academic practitioners note that active value or small‑cap strategies can be especially sensitive to implementation and fees.

Practical considerations and costs

Before adding international stocks, evaluate these practical items:

• Expense ratios and fees: Compare ETF and fund fees; small differences compound over time.
• Trading spreads and liquidity: Country or single‑stock exposure can widen spreads.
• Tax implications: Dividend withholding, local taxes, and treaty benefits vary; consult a tax professional.
• Market hours and settlement: Time zone differences affect trading and settlement cycles.
• Custody and platform access: Choose a broker that offers efficient access; for crypto/tokenized securities consider custodial and regulatory differences and a secure wallet like Bitget Wallet if using tokenized instruments.

As of April 2025, institutional infrastructure developments (tokenization pilots and settlement modernization) have the potential to change custody and settlement costs over the medium term, but retail implementation remains uneven across jurisdictions.

How to decide an allocation (guidelines and examples)

A simple framework when answering are international stocks worth it for your portfolio:

1. Clarify goals and time horizon: Long horizons tolerate EM volatility; short horizons prioritize liquidity.
2. Assess risk tolerance: Higher allocations to international equities (especially EM) increase volatility.
3. Check current valuations: Use relative P/E, dividend yield, and expected return estimates from providers (Vanguard, Fidelity) to inform tactical tilts.
4. Pick an approach: Market‑cap weights (global market‑cap), fixed percentage (e.g., 20–40% ex‑U.S. for many U.S. investors), or tactical bands (rebalance if allocation deviates by X%).

Sample allocations (illustrative, not advice):

• Conservative U.S. investor: 80% U.S equities / 20% international equities (with half in developed ex‑U.S. and half in EM)
• Balanced long‑term investor: 60% U.S equities / 40% international equities (30% developed ex‑U.S., 10% EM)
• Growth‑oriented investor: 50% U.S equities / 50% international equities (larger EM tilt)

Rebalancing: Maintain chosen bands (e.g., ±5%) and rebalance annually or when allocations deviate materially.

Metrics and tools to evaluate "worth"

To monitor whether international stocks are "worth it" for your portfolio, use these metrics:

• Relative valuations: trailing and forward P/E, price-to-book, and cyclically adjusted measures.
• Dividend yield and earnings growth rates for comparable indexes.
• Expected return models (e.g., CAPE‑based or dividend discount frameworks).
• Volatility and drawdown statistics: rolling volatility and maximum drawdown comparisons.
• Correlation matrices and incremental portfolio risk contributions.
• Rolling multi‑year return comparisons: 3, 5, 10‑year rolling windows to see regime shifts.
• Scenario analysis: currency shock, commodity cycle, or regional recession impacts.

Morningstar and Schwab provide regular cross‑market valuation and correlation dashboards that many investors use for monitoring; consider reviewing those reports periodically.

Evidence from major research and viewpoints

A synthesis of selected industry views on whether are international stocks worth it:

• Morningstar: Emphasizes valuation and active management opportunities in certain regions; notes that diversification benefits persist even when correlations rise. (As of Jan 15, 2026, Morningstar research highlights valuation gaps between U.S. and ex‑U.S. equities.)
• Vanguard: Advocates a global, low‑cost approach and notes that market‑cap weighting is a simple baseline; it also publishes expected return estimates that can guide allocation decisions.
• Fidelity: Points to pockets of value abroad and the role of international stocks in broadening sector and regional exposure.
• Charles Schwab: Provides practical guidance on ETFs, ADRs, and trading implications, stressing cost and tax considerations.
• Wealthfront: Shows tax and rebalancing benefits of diversified global portfolios and offers model allocations reflecting risk tolerance.
• Alpha Architect: Focuses on factor and active strategies, noting potential active manager opportunities in less efficient foreign markets.
• The Wall Street Journal: Regular coverage underscores regime shifts (periods when international markets lead) and investor sentiment dynamics.

Taken together, these sources generally concur that international stocks can be worth including for diversification and potential long‑run return benefits, but the exact allocation should reflect valuation, cost, and investor circumstances.

Common objections and frequently asked questions

Q: Do U.S. multinationals provide enough foreign exposure so I don’t need international stocks?

A: U.S. multinationals do earn overseas revenue, but they are still priced and regulated in the U.S. market and often have sector concentration. Direct international equities provide exposure to domestically focused foreign companies and different sector mixes not captured by U.S. multinationals.

Q: Should I hedge currency exposure?

A: Hedging reduces short‑term currency volatility but has a cost and may remove a potential source of returns. For long horizons many investors accept unhedged exposure; for shorter horizons or income mandates, hedging may be appropriate.

Q: How much should I allocate to emerging markets?

A: Many allocations range from 5–15% of total equity for U.S. investors, depending on risk tolerance and conviction. Emerging markets add return potential but also raise volatility and political risk.

Q: When should I rebalance?

A: Common rules include calendar rebalancing (annual or semiannual) or threshold rebalancing when allocations deviate by a set band (e.g., ±5%). Rebalancing discipline maintains target risk exposures.

Practical checklist for investors

Before adding international exposure, run this checklist:

1. Review your goals, horizon, and risk tolerance.
2. Check relative valuations and recent performance trends.
3. Decide your vehicle: ex‑U.S. ETF, regional ETF, ADRs, or active fund.
4. Choose hedged vs unhedged currency exposure.
5. Confirm tax and dividend withholding implications for your jurisdiction.
6. Select a broker/platform that supports international trading; for tokenized or digital custody, consider established custodial solutions and Bitget Wallet for secure storage.
7. Set allocation targets and rebalancing rules.
8. Monitor outcomes with the metrics in the Metrics and tools section.

See also

• Global asset allocation
• Exchange‑traded funds (ETFs)
• Currency hedging
• Emerging markets
• Diversification (finance)

References and selected further reading

• Morningstar research reports on global equity valuations (as of Jan 2026)
• Vanguard publications on global allocation and expected returns
• Fidelity insights on international market opportunities
• Charles Schwab investor guides to international ETFs and trading
• Wealthfront model portfolio guidance
• Alpha Architect analyses on active opportunities in less efficient markets
• Wall Street Journal market coverage on international rotations and sector leadership

As of Apr 15, 2025, institutional infrastructure developments such as the DTCC tokenization roadmap were widely reported and may influence future market access and settlement (source: CoinDesk reporting summarized in industry briefings).

Notes for editors/contributors:

• Update empirical figures (returns, valuation ratios, dollar index) regularly; sections requiring periodic revision include Historical performance, Recent trends, and Evidence.
• Charts to add: rolling returns (U.S. vs ex‑U.S.), relative valuation gaps, dollar index trends, correlation heatmaps, and sample country case studies.

Further exploration and next steps

If you’re still asking are international stocks worth it for your portfolio, start small and methodical: pick a low‑cost ex‑U.S. ETF or a diversified global fund, set clear allocation and rebalancing rules, and monitor valuation and currency signals. Consider platform and custody choices carefully — Bitget offers robust trading infrastructure and Bitget Wallet for secure custody where tokenized or digital access is involved. For deeper research, review the referenced Morningstar, Vanguard, Fidelity, Schwab, Wealthfront and Alpha Architect materials.

Explore Bitget features to implement global exposure efficiently and securely. Monitor tax implications and consult a qualified tax or financial professional if you need tailored advice.