Global Investing: Expanding Your Portfolio Horizons

In an era of interconnected economies and digital finance, the opportunity to reach beyond domestic borders has never been more compelling. By expanding your investment focus globally, you can tap into new growth engines, shield your portfolio from localized downturns, and benefit from diverse currency movements.

Understanding the Global Market Landscape

The world’s capital markets have undergone seismic shifts in 2025. The U.S. net international investment position ended Q2 at a negative $26.14 trillion net position, reflecting both soaring liabilities and rising assets. U.S. holdings reached $39.56 trillion, while foreign claims on the U.S. climbed to $65.71 trillion.

International stocks have outperformed U.S. peers, with regions like South Korea surging 43% and Brazil and Mexico up roughly 30%. China’s Morningstar China Index gained 25%, fueled by tech giants Tencent and Alibaba, while European banks enjoyed robust gains on defense spending and lower borrowing costs.

Why Diversify Internationally

Building a globally diversified portfolio offers several core advantages. First, you gain enhanced growth potential across regions that may outperform stagnant domestic markets. Second, it provides risk reduction through varied economic cycles, lowering overall volatility. Third, currency diversification can serve as an inflation hedge when the dollar weakens.

• Access to high-growth emerging and developed markets
• Mitigation of country-specific downturns and political shocks
• Currency benefits from exchange-rate changes of $1.29 trillion boosting asset values in Q2
• Exposure to unique sectoral strengths like Asia’s tech innovation and Latin America’s resources

Investment Vehicles and Strategies

Investors have an array of tools to capture global opportunities. Equity exposure can be achieved through direct stock purchases or region-focused ETFs and mutual funds. Fixed-income seekers may consider international government bonds or bond ETFs to diversify rate risk.

• Equity: Vanguard FTSE All-World ex-US ETF (VEU) for broad market access
• Fixed Income: iShares International Treasury Bond ETF (IGOV) for developed-market bonds
• Emerging Markets: iShares MSCI Emerging Markets ETF (EEM) for rapid-growth economies
• Real Estate: Vanguard Global ex-U.S. Real Estate ETF (VNQI) to hedge domestic downturns
• Currency-Hedged Funds: WisdomTree International Hedged Equity Fund (HEDJ) to minimize FX volatility

Key Economic Projections for 2025

Building Your Global Portfolio

As a baseline, non-U.S. equities should account for roughly 40% of your stock allocation, reflecting global market capitalization. Younger investors can maintain that full slice, while those nearing retirement may trim international exposure to manage currency swings.

Including an emerging-markets segment adds growth potential within the broader international sleeve. Remember that emerging markets showing low correlation can further smooth returns over market cycles.

• Baseline: 60% U.S. / 40% non-U.S. equity split
• Age-adjusted tweaks: reduce non-U.S. slice approaching retirement
• Maintain at least 25% non-U.S. equity for retirees
• Embed emerging-markets allocation within broad foreign funds

Looking Ahead: Market Outlook and Long-Term Drivers

International equities entered 2025 at historically low valuations and have since underpromised and overdelivered in 2025. Meanwhile, U.S. markets face headwinds from high valuations, policy uncertainty, and mounting debt.

Challenges persist: potential high fiscal spending and tariff hikes could stoke inflation, and central banks may have limited room to adjust rates. Geopolitical shifts and trade policies add further uncertainty.

Yet long-term structural forces—like productivity improvements through AI technologies—promise to boost output per worker amid demographic shifts. By embracing a global lens, investors can position themselves to harness these secular trends and build resilient portfolios for decades.

Conclusion

Global investing is not merely an option—it is a strategic imperative for those seeking diversified growth and risk management. By leveraging a mix of equity, fixed income, real estate, and currency strategies, you can construct a robust portfolio that weathers local storms and captures worldwide opportunity.

Embrace the vast potential beyond your home market and let the world’s economies enrich and fortify your financial journey.