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Edy

Foreign Diversification

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Hello. With the dollar doing what it is doing-trade deficits, savings rates, etc.-wouldn't it be prudent to have more than the frequently mentioned percentage of 10-20% in foreign holdings in a well-diversified 403b portfolio?

 

There are emerging markets, large and small developed markets for investment, and even growth and value possibilities. It seems to me that given the low expectations of real returns of 5-6% of domestic holdings going forward(per Buffet, Siegal, Ibbotson), that it would be wise/okay to have more than 20% foreign and have perhaps 30-45% given that going forward the total returns might outdo the US returns and thus build the egg faster. I am thinking that a possible average of 7-9% real return for foreign will greatly add to the 5-6% for domestic holdings. Real return is the return before inflation is added. Of course, past returns don't guarantee future returns and no one can predict the future. I am thinking with my Fidelity 403b account to have emerging markets, international small, some Asia, some Latin America, some Canada and the valuey developed markets of Dodge and Cox International in my IRA. To ensure sufficient diverisfication with these, of course, I have large and small US holdings both growth and value, a little bond action (which will increase as I move closer to Geezerville), and some reits. I have 13 years to retirement. We all want the highest return possible with acceptable risk levels. I would never put all of my money in a plutonium mine in Chile, for example.

 

Any informed opinions as to whether the foreign holdings should stay at the 10-20% level or does anyone think like me and prefer to have more than this percentage?

 

Just curious, thanks.

Edy

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