A Prudent Diversion: Beyond the Shores of American Fortune

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It is a truth universally acknowledged, amongst those possessed of a brokerage account, that a man must be in want of a home bias. Indeed, to invest solely within one’s native land is as natural as a peacock displaying its plumage – showy, perhaps, but lacking in true discernment. We Americans, alas, are prone to believing our own press releases, convinced that the sun rises and sets upon the S&P 500. The Vanguard S&P 500 ETF (VOO 0.20%) and the Vanguard Total Stock Market ETF (VTI 0.35%) become, therefore, not merely investments, but objects of a rather provincial affection.

For years, we have been assured that international ventures are the domain of fools and adventurers. The returns, or rather the lack thereof, have lent a certain credence to this notion. But to dismiss the rest of the world as a mere source of disappointment is to mistake a temporary setback for a permanent condition – a failing common to both investors and playwrights.

The recent turn of fortune, however, has provided a most instructive lesson. The era of unrestrained growth in a select few technology behemoths has waned. Today, value, resilience, and a touch of prudence are once again in vogue. And, dare I say, a judicious glance beyond our borders might prove most rewarding.

If your portfolio, like a well-guarded castle, remains overwhelmingly American, then allow me to present the case for the Vanguard Total International Stock ETF (VXUS +0.11%). It is not a panacea, mind you, but a sensible addition to a well-ordered estate.

Concerning the Nature of This International Fund

This ETF, a rather comprehensive collection of over 8,000 stocks, draws its strength from the FTSE Global All Cap ex-US Index. It encompasses both the established markets of Europe and Japan, as well as the more spirited, if somewhat unpredictable, economies of the emerging world. And, at an expense ratio of a mere 0.05%, it is a bargain even for the most frugal of misers.

For too long, we have been seduced by the apparent superiority of American enterprise. The S&P 500 companies have, in recent years, enjoyed a period of exceptional earnings growth and stock performance. But history, like a fickle audience, is prone to shifting its affections. Cycles turn, fortunes ebb and flow, and what was once considered invincible may one day find itself humbled.

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Why Now, You Ask? A Question of Timing and Temperance

One of the enduring arguments for international investment lies in the simple truth that foreign stocks are often, shall we say, more reasonably priced than their American counterparts. But mere cheapness, without the prospect of future earnings growth, is akin to purchasing a dilapidated mansion – a ruin, however picturesque, will not yield a profit.

Today, however, the winds may be shifting. International stocks appear poised to benefit from a confluence of factors – a resurgence in economic growth, a more favorable valuation, and a healthy dose of skepticism towards the perpetually optimistic American market.

In 2026, earnings growth for the S&P 500 is projected to be around 13%. While respectable, this pales in comparison to the expected 17% growth rate in emerging markets, with developed non-U.S. markets also anticipated to grow at a healthy 9%.

Even if international earnings were to merely approach American levels, the deep value inherent in these stocks – the Vanguard Total International Stock ETF currently trades at a price/earnings ratio of 17.5, compared to a rather lofty 28.2 for the S&P 500 – makes them an attractive proposition.

Furthermore, let us not forget that markets, like actors on a stage, often excel at different times and in different acts. A portfolio built on a foundation of global stocks is not merely diversified; it is resilient – capable of weathering the storms that inevitably buffet the financial world.

A portfolio comprised solely of American stocks may offer a comforting illusion of security, but one built on a broader, more global foundation is far more likely to endure – and, dare I say, to prosper – in the long run. It is a matter not of blind faith, but of prudent calculation.

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2026-02-23 17:52