Vanguard recommends investors increase non-U.S. holdings to 40%

Global stock markets are likely to outperform the U.S., and fees on international funds have fallen, executives say

Jan 11, 2019 @ 10:24 am

By Bloomberg News

Investors should put about 40% of their portfolios in non-U.S. stocks and bonds to diversify their holdings, according to top executives at Vanguard Group, the fund giant that manages $4.9 trillion.

Global stock markets are likely to outperform the U.S., which the firm expects to return roughly 4% to 6% annually over the coming decade, CEO Tim Buckley and chief investment officer Greg Davis said Thursday during a webcast.

Vanguard formerly recommended allocating about 30% of portfolios to non-U.S. assets, the executives said. One reason for the increase: Fees have fallen on international funds, improving net returns.

Other comments from the Valley Forge, Pa.-based firm:

• Expect volatility to continue in 2019. Last year was normal, while the low volatility of 2017 was an aberration.

• Stay invested. "Going all cash is way too risky," Mr. Buckley said.

• Long-term U.S. Treasury yields are likely to rise as supply grows with an expanding deficit and foreign buyers diminish.

• The government shutdown is likely to slow U.S. growth by 0.1% or more per week.

• Competitors cut fees to zero on some funds as a marketing tactic, but Vanguard won't go that low. "We'll continue to do what we're doing," Mr. Buckley said.

(More: Gundlach criticizes buy-the-dip mentality)

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