Does International Diversification Still Make Sense?

And if so, what is the right amount?

One of the most frequently asked questions in personal finance is, “Should I include international stocks in my portfolio? And if so, what is the ideal percentage?”

In a paper titled Four Reasons to Embrace Global Investing, researchers at Vanguard provide one answer to this question: What they found is that historically an allocation to international stocks in the range of 30% to 40% has provided the greatest diversification benefit in terms of volatility reduction.

In other research, Vanguard provides an equally important finding: While international stocks can help dampen a portfolio’s volatility, over time there has been no demonstrable performance advantage to either domestic or international stocks.

So the reason you would want to own international stocks, according to this research, is really just for the diversification benefit.