True Diversification Calls for A Global Outlook
Picking the right countries, sectors, and securities (and getting the timing right) is virtually impossible to do consistently. That’s where consistent global diversification comes in.
When stocks and bonds underperform—especially at the same time—you might think there’s nowhere to hide. But if you’re in it for the long term, hiding or staying on the sidelines is the wrong response. Participation may be a better one. Yet picking the right countries, sectors, and securities (and getting the timing right) is virtually impossible to do consistently.
That’s where consistent global diversification comes in, and that’s why Vanguard model portfolios allocate a consistent percentage of stocks (40%) and bonds (30%) to opportunities outside the U.S.
What’s behind Vanguard’s conviction that long-term global allocations can lead to successful investing?
Our positive outlook for non-U.S. markets.
The higher dividend yields historically available in global investing.
In addition, non-U.S. allocations have historically reduced overall portfolio volatility—not to mention the difficulty of predicting whether U.S. or non-U.S. markets will outperform in any given year.
Our positive international outlook
Current valuations alone suggest that the long period of U.S. equities’ outperformance may be coming to a close.
That’s why Vanguard has increased its 10-year forecast returns for both U.S. and non-U.S. stocks and bonds, with the latter forecast suggesting significant benefits in increased global exposure.
Higher dividend yields
Another reason to look beyond U.S. borders is the higher-yield-generating opportunities available outside the U.S. While U.S. dividend-oriented strategies have fared well historically, international stocks have also offered favorable dividend values.
An international portfolio over the past 10 years benefited from a higher dividend yield than that of a U.S.-only portfolio.
Global dividend yields (average annual yields, December 31, 2013–December 31, 2022)
Vanguard strategic model portfolios
Our model portfolios are an excellent way to ensure exposure to non-U.S. stocks without having to make tactical allocations based on headlines and market events. Our models all maintain a long-term perspective, using a portfolio construction framework that constantly reviews model allocations for potential volatility and return outcomes. Through a range of total return and objective-based model portfolios, we seek to:
