Fidelity: Five Myths of International Investing

Why U.S. investors shouldn't ignore international stocks

  • Investing Strategies
  • International Investments
  • Investing Strategies
  • International Investments
  • Investing Strategies
  • International Investments

BOSTON – Many U.S. investors are ignoring or avoiding international stocks, often due to some common misperceptions. A new paper from Fidelity Investments, "Five Myths of International Investing," examines and debunks that prevailing conventional wisdom.

"Having a globally diversified portfolio shouldn't be a foreign concept," says Tim Cohen, chief investment officer at Fidelity Investments. "Many U.S. investors incorrectly assume that having international exposure is too risky. On the contrary, international stocks within a globally balanced portfolio can provide enhanced diversification and increase the potential for better risk-adjusted returns over the long term."

  • Myth 1 - International investing is too risky
    Reality: In combination with U.S. stocks, international exposure can actually lower risk in an equity portfolio. Over the past 60 years, a globally balanced hypothetical portfolio of 70% U.S./30% international equities has produced better risk-adjusted returns (Sharpe ratio)1 and lower volatility than an all-U.S. portfolio.
  • Myth 2 - U.S. stocks usually outperform foreign stocks
    Reality: Historically, the performance of international and U.S. stocks is cyclical: One typically outperforms the other for several years before the cycle rotates.
  • Myth 3 - U.S. multinationals provide adequate international diversification
    Reality: While U.S. multinationals may provide some exposure to foreign markets, they still offer only a fraction of the currency diversification offered by overseas markets.
  • Myth 4 - Investors should hedge their currency exposure
    Reality: While it might sound good in theory, the effort and expense involved in currency hedging might not be worth it. Since 1973, currency hedging has detracted from returns in 54% of quarters, and helped in only 46% of quarters.
  • Myth 5 - Index funds beat active funds in international
    Reality: Investing in companies overseas comes with political, liquidity, and currency risks, all of which can create price inefficiencies within individual stocks. Taking advantage of these inefficiencies requires specialized local knowledge, careful research, and efficient trading. Active managers can maneuver a portfolio to take advantage of these inefficiencies and have a demonstrated ability to outperform their index, producing significantly greater excess return compared to passive strategies.

Even investors who had a well-diversified portfolio of global stocks may find their allocation out of balance after several years of U.S. stocks outperforming international markets.

Now may be an ideal time to re-examine stock allocations and add more international equities to your investment mix, especially actively managed strategies.

For more information on the "Five Myths of International Investing," please click here.

About Fidelity Investments

Fidelity's goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.0 trillion, including managed assets of $2.0 trillion as of January 31 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients' money. Privately held for nearly 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

Our Company

Personal Investing

We provide financial planning and retirement options such as IRAs, annuities, and managed accounts; brokerage and cash management products; college savings accounts; and other financial services for millions of individual investors.

Workplace Investing

We work with employers to build benefit programs for their employees, and provide recordkeeping, investments, and servicing in defined contribution, defined benefit, health & welfare, and stock plan services.

Fidelity Institutional

We bring sophisticated technology and highly personalized service together to offer clearing, custody, investment products, brokerage, and trading services to a wide range of financial firms.

Fidelity Institutional Asset Management

Fidelity Institutional Asset Management is a distribution organization dedicated to the institutional marketplace. It serves consultants and institutional investors, such as defined benefit and defined contribution plans, endowments, and financial advisors.

Fidelity Charitable

Fidelity Charitable is an independent public charity that allows donors to establish a dedicated donor-advised fund to support their favorite charities in the short term and create a systematic plan for longer term philanthropic goals.

Fidelity Labs

Fidelity Labs explores emerging technology and harnesses innovation to benefit Fidelity's businesses and customers.

Discovery Ventures Program

The Discovery Ventures Program is a program focused on startups looking to grow their businesses in the financial services industry. The program is designed to help participating companies better understand how to engage with large enterprises so that they can accelerate their sales into large enterprises and significantly increase their growth.

Careers at Fidelity

Fidelity Careers Sales, relationship management, product, marketing, technology, operations, and corporate functions


Asset Management Careers Investment management and support