Should I hold foreign stocks?
Probably, at about 40% of your stocks, and for two reasons that have nothing to do with diversification: foreign markets are priced at a deep discount to the US, and most of the US lead over the past 35 years came from its stocks getting more expensive, not from earning more.
Probably High confidence on "do not sell to get there". Moderate on the direction. Low on how much.
Not for the reason people give
The usual case for foreign stocks is that they protect you when US stocks fall. They do not. Foreign stocks rose in 6% of the worst US stock months since 2000. Value in three regions counts as about one and a half independent ideas, not three. When US stocks fall hard, everything that is a stock falls with them.
The case that holds up is about price and humility. At the end of June 2026 US stocks traded at 36 times their ten-year average earnings, against 21 for the rest of the developed world and 19 for emerging markets, on one provider's count that puts every country on the same footing. (The 41 quoted elsewhere on this site is the standard US-only measure from a later date; the two are not interchangeable.) The US is priced at 1.7 times the developed world and 1.85 times emerging markets. Of the 4.7 points a year by which US stocks beat foreign stocks over the 35 years to 2024, AQR estimates that 3.8 points came from US stocks becoming more expensive rather than from US companies earning more. A re-rating can run for decades, and it cannot run forever.
A century of country data says a market this expensive relative to others tends to earn a bit less over the next ten years, by about 1.4 points a year at today's gap. It also says the range around that number runs between minus 7 and plus 4, and that since 1990 the relationship has been too weak to detect. Do not treat it as a forecast. Treat it as a reason not to hold 100% of your stocks in the most expensive market in the world.
How much, and how to get there
The world's stock market is about 64% US by size, so a 65/35 split is the neutral starting point. The portfolios on this site sit at about 64/36 today and move to 60/40 with new contributions. Past 60/40 is a bet: 55/45 or 50/50 are defensible if you can live with your returns differing from a world index by 1 to 1.5 points a year in either direction, and I stop at 60/40 because I cannot say more than that.
The size of the bet is small either way. Shifting 10 points from US to foreign stocks is worth about 0.14 points a year in expected return against 0.8 to 1.4 points a year of year-to-year difference. It would take somewhere between 55 and 178 years of results to know whether it was right. Meanwhile, selling 10 points of a taxable position where three quarters of the value is gain costs about 1.1% of your wealth in tax, once, for certain. So the rule is: move with new money, never by selling. With contributions of 10% a year, 60/40 arrives in less than a year at no cost.
Do not overweight emerging markets on the valuation argument. They are cheap against the US and near the top of their own history, and their companies pay out less to shareholders than US companies do.
Currency
When you hold a foreign stock you also hold its currency, and the currency has been most of the story lately. A weak dollar added about 7 points to foreign stock returns in 2025, when developed markets returned 32% against 18% for the S&P 500. A strong dollar subtracted about 1.7 points a year through the 2010s. Over any long window the currency's average contribution cannot be told from zero.
A currency-hedged fund removes that. Hedging cuts the swings of a foreign holding by about a fifth, and that reduction is real and reproducible. It does not change the expected return, and the hedge produces taxable gains and losses every year, so if you hedge, do it in a retirement account. The funds on this site are unhedged, and hedging is the input to this question I have looked at least.
What losing looks like
Foreign stocks trailed the US for 18 years and finished 69.0% behind. That happened once already, in living memory, and it can happen again. Hold 40% foreign because you have decided the price is right and you cannot pick the winner, not because you expect it to feel good.
Numbers as of 2026-09-02. Corrections lists anything that changed.