Some people will tell you you can gain complete exposure to stock markets globally by simply buying a single global equity fund, one that invests in stocks everywhere. And that’s true. However, these funds, and not you, decide how much of your money is invested outside america.
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The Vanguard Global Equity Fund, by way of instance, has 46 percent of its investments overseas, which strikes me as high. However, it’s your call. Owning stock inside and outside the United States is what’s important. In case you were, say, French, or Chinese, or Mexican, I’d suggest much the exact same thing. Own a diversified portfolio with stock from around the world, not just your home country.
What about bonds?
The bond portion of your portfolio can be equally simple. Buy a total bond index fund. It’ll hold U.S. Treasuries and bonds of durations — brief, intermediate and long-term difficulties. And if you wanted to put 20 percent of your bond holdings within an international bond fund, it would be fine with me.
And that’s it.
Each year, you can shift 1 percent of your cash over to bonds and leave everything else alone. That means as you become older, more of your money will be in bonds. That will be a fantastic thing because it is going to hedge the risk of a sudden fall in stock prices as you approach a time when you’ll need the money.
Now, an alternative to changing the money yourself would be purchasing a target date fund, a mutual fund meant to meet investors needs in a particular future date when they plan to retire, for instance. The fund will automatically move you into more conservative investments over time.
If you like the idea, just make sure you are comfortable with what they hold. Every target date fund is slightly different in the way it stinks, its mix between stocks and bonds and what proportion of stocks it has in international holdings.
If you need assistance with complicated financial issues — stock options, by way of example, if you are lucky enough to be offered them — or just to double-check your choices, I would recommend a fee-only financial planner who charges by the hour and works as a fiduciary. Fee-only means they do not receive commissions on which they advocate, and fiduciary means they’re bound to act in your best interest.