I’ve been getting this question a lot lately. Okay, not those exact words, but a few of my investment savvy clients have been reaching out to me and asking the question, “Do I need to have more international stocks in my portfolio?” 

While international stocks may be sub-divided into many sectors in the investing arena, the two broad sectors that we use are WF, which stands for “world funds” and EMF which stands for “emerging market funds.”

In the first 4 months of 2025, almost every broad index of international stocks which I reviewed outperformed our US based indices. That difference intensified when tariffs were announced in early April. But as I played with the charts on www.finance.yahoo.com in mid-June, I could see that in the last month, the tide had turned. The S&P 500 was slightly ahead of the WF category and slightly behind the EMF category when I took a snapshot of a 30-day period.

While it is way too early to tell if WF and EMF could end up having a period where long-term they outperform our US stocks, it has happened in the past. The last time we saw international stocks have a long run of outperformance was the period between 2000 to 2009. This is the period that has been named “The Lost Decade” for the US stock market, because of its poor investment performance during that period. Before then, there was a 4-year period in the Mid-1980s where Japan and other international sectors also outshined the US market. 

This is one of many reasons that we do not rely on the headlines of the day to pick asset classes. We continue to use an investment optimizer. This analyzes asset classes going back to 1987. That long period of time smooths out the micro booms and busts that asset classes go through. Currently, our optimizer is now showing a slightly higher amount of WF than it did a year ago. However, it is still less than 2% for most risk combinations, and it decreases as the portfolio becomes more aggressive. EMF has almost always surfaced as a key asset class, and it continues to be present in our optimizer as well.

For many of our clients, if they do hold international investments, it is the EMF variety. Many 401k plans have limited options in this area, so we will use the WF option when EMF are not available. 

Since we are fiduciaries, it is important that we take the long view with investing and not change course based on short term results. Our investment committee has a formal meeting quarterly, but all the advisors are watching the markets daily. We are very aware that WF and EMF have had a solid performance so far this year. 

In addition to a long and solid performance track record, below are additional reasons why U.S. stocks are often considered superior to international stocks:

Innovation Leadership: The U.S. is home to many of the world’s most innovative and dominant companies (e.g., Apple, Microsoft, Nvidia), which drive global tech and productivity growth.

Stronger Corporate Governance: U.S. markets generally offer better transparency, accounting standards, and shareholder protections compared to many international markets.

Deeper Capital Markets: The U.S. has the largest, most liquid, and most mature equity markets, allowing for efficient pricing, easier access to capital, and lower transaction costs.

Economic Resilience: The U.S. economy is diverse, consumer-driven, and has historically recovered quickly from downturns, which supports long-term corporate profitability.

Higher Profit Margins: U.S. companies tend to have higher and more stable profit margins due to scale, efficiency, and access to world-class capital and talent.

Currency Advantage: Investments in U.S. stocks are dollar denominated. During global uncertainty, the U.S. dollar is viewed as a safe-haven, reducing currency risk for dollar-based investors.

Sector Composition: The U.S. stock market is more heavily weighted toward high-growth sectors like technology and healthcare, while many international markets are more exposed to lower-growth sectors like financials and industrials.

So, in summary, yes, international stocks are alluring right now and have made some heads turn. But in the long run, you still want a portfolio your mother would approve of.

Kristina Bolhouse, CPA/PFS, CFP®

President/Shareholder

© 2025 Kristina Bolhouse and The Arkansas Financial Group, Inc., All rights reserved.

The Arkansas Financial Group, Inc. is a Fee-Only Financial Planning Firm located in Little Rock, AR serving clients in Arkansas and throughout the country.

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