10 Mistakes That Retirees Make and How to Avoid Them: Tip 4- Ignoring International Stocks

Mistake number four is ignoring international stocks. Oftentimes we hear from conservative or risk adverse investors that they want to avoid international exposure and only want to invest in US stocks.

Although this may sound safe and feel safe, it’s actually the opposite. The reason for that is all of your eggs are in one basket, which is the US stock market. So what this chart is showing is the relationship between international and US stocks.

As you can see, as US stocks go up, international stocks generally go down. And if we look at all the different years here, it’s about a 50 50 split. Most importantly, what we want to look at is here on the next page is what’s international doing when the US is performing well, and what is the US doing when international stocks are performing well?

So, as you can see, when US returns were less than 4%, international stock markets outperformed 45 out of the 45 years between 1970 to 2020, when US returns were less than 6%, international outperformed 94% of the time.

And over all return periods, US outperformed 54% of the time, whereas international outperformed 46%. So the reason we mentioned this and why it’s important for you to know as a retiree is during the distribution phase of your plan, it’s extremely important to always have a position that we can pull from at a gain.

So if we have all of our investments just in the US stock market and the market goes down, we need to have an assortment of where we can pick and choose from if we’re looking to distribute funds.