Foreign Investing: A New Slant

摘要

Reporters are skeptics by training and experience. But like everyone else, we hold unexamined premises clanking behind us like Marley's chain. One clank of mine is the merit of owning a well-diversified international mutual fund. Foreign stocks, I have said dogmatically, rise faster than those at home. What's more, foreign funds reduce your risk. When U.S. markets zag, others may zig, putting a cushion under your potential for loss. So there I sat, cozily wrapped in my premise, when a traitorous paper arrived in the mail—asking the question "Where Are the Gains From International Diversification?" The author, Rex Sinquefield, is a respected student of markets. His firm, Dimensional Fund Advisers (DFA), in Santa Monica, Calif., runs more than $10 billion in mutual funds for institutions and clients of fee-only financial advisers. Sinquefield contends that the typical foreign funds we buy—the ones that invest in the strongest stocks in the industrial world—aren't accomplishing what we think. Diversified international funds have not significantly improved investment returns. Nor have they materially reduced our risks. Big foreign stocks behave pretty much like big U.S. stocks. You can get more diversification from a mix of American funds alone.