Should you own foreign stocks alongside U.S. stocks? I’ve answered that before—and my view hasn’t changed: Yes, you should.
That said, I’m not sold on Vanguard’s one-size-fits-all approach. Their default 40% foreign stock allocation across its funds of funds (think LifeStrategy and Target Retirement funds) doesn’t fit every investor.
If you agree that owning foreign stocks makes sense, the next question is, which fund should you buy? Do you buy a global stock fund or one that excludes U.S. stocks? Should you focus on developed or emerging markets? And, of course, the ever-present debate of active versus index fund.
With 25 funds in Vanguard’s global and foreign stock lineup, there’s no shortage of choices. To keep this focused, I’m zeroing in on the global stock funds today—funds that consistently hold both U.S. and foreign stocks. We’ll tackle Vanguard’s foreign-only stock funds another day.
Additional Reading:
If you’re new to investing overseas or need a refresher, I’ve provided a few basic definitions to ensure we are all speaking the same language here.
Also, last week, I dug into the question of whether foreign stock funds should hedge currency exposure back to the dollar—see here. I don’t have a simple yes or no answer, but it is surprising that Vanguard doesn’t offer a currency-hedged foreign stock fund.
With that, let’s turn to Vanguard’s global stock funds.