What percentage of my stock portfolio should be international (non-US) stocks?
Rephrasing your question: Am I diversified if I have more than 50% US stocks?    I would say that you can certainly be diversified and have more than 50% of your portfolio invested in US Stocks.  I view the amount of international stocks (non-US) as a risk choice.  My observations have been that my international stocks have higher risk which comes with a higher reward.   I'm not comfortable with putting too much of my portfolio into a very high risk category. I personally invest 25% directly in mutual funds that invest in foreign stocks.   When you couple that with the money I invest in US stocks via mutual funds that have foreign interests (Coke, GE, etc.), I'm somewhat over 25% international in my portfolio. "Without knowing anything else about you, I'd say I need more information. If all of your investments are in stocks, then that's not really diversified, regardless of how many stocks you own.  There are other things to invest in besides stocks (and bonds, for that matter). What countries?  ""International"" is pretty broad, and some countries are better bets than others at the moment. If you're old, I'd say very little of your money should be in stocks anyway. I'd also seek financial advice that is tailored to your goals, sophistication, etc."
"An investment portfolio is typically divided into three components: All three of those can be accessed through mutual funds or ETFs. A 401(k) will probably have a small set of mutual funds for you to pick from. Mutual funds may charge you silly expenses if you pick a bad one. Look at the prospectus for the expense ratio. If it's over 1% you're definitely paying too much. If it's over 0.5% you're probably paying too much. If it's less than 0.1% you have a really good deal. US stocks are generally the core holding until you move into retirement (or get close to spending the money on something else if it's not invested for retirement). International stocks are riskier than US stocks, but provide opportunity for diversification and better returns than the US stocks. Bonds, or fixed-income investments, are generally very safe, but have limited opportunities for returns. They tend to do better when stocks are doing poorly. When you've got a while to invest, you should be looking at riskier investments; when you don't, you should be looking for safer investments. A quick (and rough) rule of thumb is that ""your age should match the portion of your portfolio in bonds"". So if you're 50 years old and approaching retirement in 15 years or so, you should have about 50% in bonds. Roughly.  People whose employment and future income is particularly tied to one sector of the market would also do well to avoid investing there, because they already are at risk if it performs badly. For instance, if you work in the technology sector, loading up on tech stocks is extra risky: if there's a big bust, you're not just out of a job, your portfolio is dead as well. More exotic options are available to diversify a portfolio: While many portfolios could benefit from these sorts of holdings, they come with their own advantages and disadvantages and should be researched carefully before taking a significant stake in them." My personal gold/metals target is 5.0% of my retirement portfolio. Right now I'm underweight because of the run up in gold/metals prices. (I haven't been selling, but as I add to retirement accounts, I haven't been buying gold so it is going below the 5% mark.) I arrived at this number after reading a lot of different sample portfolio allocations, and some books. Some people recommend what I consider crazy allocations: 25-50% in gold. From what I could figure out in terms of modern portfolio theory, holding some metal reduces your overall risk because it generally has a low correlation to equity markets. The problem with gold is that it is a lousy investment. It doesn't produce any income, and only has costs (storage, insurance, commissions to buy/sell, management of ETF if that's what you're using, etc). The only thing going for it is that it can be a hedge during tough times. In this case, when you rebalance, your gold will be high, you'll sell it, and buy the stocks that are down. (In theory -- assuming you stick to disciplined rebalancing.) So for me, 5% seemed to be enough to shave off a little overall risk without wasting too much expense on a hedge. (I don't go over this, and like I said, now I'm underweighted.) International equity are considered shares of companies, which are headquartered outside the United States, for instance Research in Motion (Canada), BMW (Germany), UBS (Switzerland). Some investors argue that adding international equities to a portfolio can reduce its risk due to regional diversification. You'll most likely need additional funding at some point in the future so that'll dilute your position below 51%. I think it's best to do what you can with what you've got before you NEED those additional funds from outside investors. They only cause trouble and if they're focused on short-term results &amp; getting their cash back as soon as possible rather than long-term sustainability, it'll be a nightmare dealing with them. Too much fiddling with your portfolio if the difference is 3-4% or less (as it's become in recent months).  Hands off is the better advice.  As for buying shares, go for whichever is the cheapest (i.e. Goog rather than Googl) because the voting right with the latter is merely symbolic.  And who attends shareholders' meetings, for Pete's sake? On the other hand, if your holdings in the company are way up in the triple (maybe even quadruple) figures, then it might make sense to do the math and take the time to squeeze an extra percentage point or two out of your Googl purchases.  The idle rich occupying the exclusive club that includes only the top 1% of the population needs to have somethinng to do with its time.  Meanwhile, the rest of us are scrambling to make a living--leaving only enough time to visit our portfolios as often as Buffett advises (about twice a year). For a non-technical investor (meaning someone who doesn't try to do all the various technical analysis things that theoretically point to specific investments or trends), having a diverse portfolio and rebalancing it periodically will typically be the best solution. For example, I might have a long-term-growth portfolio that is 40% broad stock market fund, 40% (large) industry specific market funds, and 20% bond funds.  If the market as a whole tanks, then I might end up in a situation where my funds are invested 30% market 35% industry 35% bonds.  Okay, sell those bonds (which are presumably high) and put that into the market (which is presumably low).  Now back to 40/40/20.   Then when the market goes up we may end up at 50/40/10, say, in which case we sell some of the broad market fund and buy some bond funds, back to 40/40/20.  Ultimately ending up always selling high (whatever is currently overperforming the other two) and buying low (whatever is underperforming).   Having the industry specific fund(s) means I can balance a bit between different sectors - maybe the healthcare industry takes a beating for a while, so that goes low, and I can sell some of my tech industry fund and buy that.   None of this depends on timing anything; you can rebalance maybe twice a year, not worrying about where the market is at that exact time, and definitely not targeting a correction specifically.  You just analyze your situation and adjust to make everything back in line with what you want. This isn't guaranteed to succeed (any more than any other strategy is), of course, and has some risk, particularly if you rebalance in the middle of a major correction (so you end up buying something that goes down more).  But for long-term investments, it should be fairly sound. You can simply stick with some index funds that tracks the S&P 500 and Ex-US world market. That should provide some good diversification. And of course, you should always have a portion of your money in short/mid term bond fund, rebalancing your stock/bond ratio all the way as deemed necessary. If you want to follow the The Über–Tuber portfolio, you'd better make sure that there's minimum overlapping among the underlying shares that they hold. OTC markets group definitely has a lot of foreign and startup issuer is the tech field. Also you have to define technology. Do you want computer technology, engineering, hardware manufacturing, software companies, biotech, or something else? Technology can mean many things and what you specifically want may end up shaping your portfolio. Also technology is a volatile sector I'd diversify with something more stable like utilities or basic materials if I were you. I'm in a remarkably similar situation as yourself.  I keep roughly 80% of my portfolio in low-cost ETFs (16% bond, 16% commodities, 48% stock), with about 20% in 6-8 individual stocks.  Individual stocks are often overlooked by investors.  The benefits of individual stock ownership are that you can avoid paying any holding or management fee (unlike ETFs and mutual funds). As long as you assess the fundamentals (P/B, P/E, PEG etc.) of the company you are buying, and don't over-trade, you can do quite well. I recommend semi-annual re-balancing among asset classes, and an individual stock check up.  I've found over the years that my individual stocks outperform the S&P500 the vast majority of the time, although it often accompanied by an increase in volatility.  Since you're limiting your stake to only 20%, the volatility is not really an issue. "Here's a dump from what I use. Some are a bit more expensive than those that you posted. The second column is the expense ratio. The third column is the category I've assigned in my spreadsheet -- it's how I manage my rebalancing among different classes. ""US-LC"" is large cap, MC is mid cap, SC is small cap. ""Intl-Dev"" is international stocks from developed economies, ""Emer"" is emerging economies. These have some overlap. I don't have a specific way to handle this, I just keep an eye on the overall picture. (E.g. I don't overdo it on, say, BRIC + Brazil or SPY + S&P500 Growth.) The main reason for each selection is that they provide exposure to a certain batch of securities that I was looking for. In each type, I was also aiming for cheap and/or liquid like you. If there are substitutes I should be looking at for any of these that are cheaper and/or more liquid, a comment would be great. High Volume: Mid Volume (<1mil shares/day): Low Volume (<50k shares/day): These provide enough variety to cover the target allocation below. That allocation is just for retirement accounts; I don't consider any other savings when I rebalance against this allocation. When it's time to rebalance (i.e. a couple of times a year when I realize that I haven't done it in several months), I update quotes, look at the percentages assigned to each category, and if anything is off the target by more than 1% point I will buy/sell to adjust. (I.e. if US-LC is 23%, I sell enough to get back to 20%, then use the cash to buy more of something else that is under the target. But if US-MC is 7.2% I don't worry about it.) The 1% threshold prevents unnecessary trading costs; sometimes if everything is just over 1% off I'll let it slide. I generally try to stay away from timing, but I do use some of that extra cash when there's a panic (after Jan-Feb '09 I had very little cash in the retirement accounts). I don't have the source for this allocation any more, but it is the result of combining a half dozen or so sample allocations that I saw and tailoring it for my goals." We face the same issue here in Switzerland. My background: Institutional investment management, currency risk management. My thoughs are: Home Bias is the core concept of your quesiton. You will find many research papers on this topic. The main problems with a high home bias is that the investment universe in your small local investment market is usually geared toward your coutries large corporations. Lack of diversification: In your case: the ASX top 4 are all financials, actually banks, making up almost 25% of the index. I would expect the bond market to be similarly concentrated but I dont know. In a portfolio context, this is certainly a negative. Liquidity: A smaller economy obviously has less large corporations when compared globally (check wikipedia / List_of_public_corporations_by_market_capitalization) thereby offering lower liquidity and a smaller investment universe. Currency Risk: I like your point on not taking a stance on FX. This simplifies the task to find a hedge ratio that minimises portfolio volatility when investing internationally and dealing with currencies. For equities, you would usually find that a hedge ratio anywhere from 0-30% is effective and for bonds one that ranges from 80-100%. The reason is that in an equity portfolio, currency risk contributes less to overall volatility than in a bond portfolio. Therefore you will need to hedge less to achieve the lowest possible risk. Interestingly, from a global perspective, we find, that the AUD is a special case whereby, if you hedge the AUD you actually increase total portfolio risk. Maybe it has to do with the AUD being used in carry trades a lot, but that is a wild guess. Hedged share classes: You could buy the currency hedged shared classes of investment funds to invest globally without taking currency risks. Be careful to read exactly what and how the share class implements its currency hedging though. John Bogle never said only buy the S&P 500 or any single index Q:Do you think the average person could safely invest for retirement and   other goals without expert advice -- just by indexing? A: Yes, there is a rule of thumb I add to that. You should start out   heavily invested in equities. Hold some bond index funds as well as   stock index funds. By the time you get closer to retirement or into   your retirement, you should have a significant position in bond index   funds as well as stock index funds. As we get older, we have less time   to recoup. We have more money to protect and our nervousness increases   with age. We get a little bit worried about that nest egg when it's   large and we have little time to recoup it, so we pay too much   attention to the fluctuations in the market, which in the long run   mean nothing. How much to pay Q: What's the highest expense ratio that one should pay for a   domestic equity fund? A: I'd say three-quarters of 1 percent maybe.   Q: For an international fund?  A: I'd say three-quarters of 1 percent.   Q: For a bond fund? A: One-half of 1 percent. But I'd shave that a little bit. For   example, if you can buy a no-load bond fund or a no-load stock fund,   you can afford a little more expense ratio, because you're not paying   any commission. You've eliminated cost No. 2.... "Wow, this analysis really surprised me. Very complete and useful, but i think my teacher request was easier. He just said: ""Try to build a diversified portfolio. Then try to add a commodity (like silver or gold) and understand how the risk vary introducing an asset like this."" So, i'm basically making a stocks portfolio and i'm calculating its expected return and risk. (for example 40%FB, 10%JNJ, 20%GS, 10%F and 20%MCD) then i'm adding GLD (so now i have something like 20%FB, 10%JNJ, 10%GS, 10%F and 20%MCD 30%GLD) and i'm actually making an excel spreadsheet where i calculate all the: -Expected returns -St Deviation -Covariance  At the end i compare the returns and the risks on the 2 different portfolios." "You might find some of the answers here helpful; the question is different, but has some similar concerns, such as a changing economic environment. What approach should I take to best protect my wealth against currency   devaluation & poor growth prospects. I want to avoid selling off any   more of my local index funds in a panic as I want to hold long term.   Does my portfolio balance make sense? Good question; I can't even get US banks to answer questions like this, such as ""What happens if they try to nationalize all bank accounts like in the Soviet Union?""  Response: it'll never happen. The question was what if! I think that your portfolio carries a lot of risk, but also offsets what you're worried about.  Outside of government confiscation of foreign accounts (if your foreign investments are held through a local brokerage), you should be good.  What to do about government confiscation?  Even the US government (in 1933) confiscated physical gold (and they made it illegal to own) - so even physical resources can be confiscated during hard times. Quite a large portion of my foreign investments have been bought at an   expensive time when our currency is already around historic lows,   which does concern me in the event that it strengthens in future. What   strategy should I take in the future if/when my local currency starts   the strengthen...do I hold my foreign investments through it and just   trust in cost averaging long term, or try sell them off to avoid the   devaluation? Are these foreign investments a hedge?  If so, then you shouldn't worry if your currency does strengthen; they serve the purpose of hedging the local environment.  If these investments are not a hedge, then timing will matter and you'll want to sell and buy your currency before it does strengthen.  The risk on this latter point is that your timing will be wrong." Any time you are optimizing a portfolio, the right horizon to use for computing the statistics you will use for optimization (expected return, covariance, etc.) will be the same as your rebalance/trading frequency.  If you expect your trading strategy to trade once a day, you should use daily data for optimization.  Ditto for monthly or quarterly.  If at all possible you should use statistics across the board that are computed at the same frequency as your trading. Regarding currency pricing, I see no reason you can't take the reported prices and convert them to whatever currency you want using that day's foriegn exchange rate.  Foreign exchange rates are available for free at the Fed and elsewhere.  Converting prices from one currency to another is not rocket science. Since you are contemplating putting actual money behind this, note that using data to compute statistics is less reliable for lower statistical moments.  The mean (expected return) is the first moment, so using historical returns is extremely unreliable at predicting future returns.  The variances and covariances are second moments, they are better.  Skewness and kurtosis, yet better.  The fact that the expected return can't reliably be estimated from past returns is the major downfall of the Markowitz method (resulting portfolios are often very crazy and will depend critically on the data period you use to set them up).   There are approaches to fixing this, such as Black-Litterman's (1992) method, but they get complicated fast.