Global Investing: Diversifying Across Borders

In an increasingly interconnected economy, investors face the choice of staying within familiar domestic markets or exploring global opportunities. While comfort and convenience often drive home bias, expanding horizons can unlock new sources of growth and resilience. By looking beyond borders, investors can build a portfolio that weathers diverse economic cycles, political shifts, and currency fluctuations.

Why Diversify Beyond Domestic Markets

Diversification is a fundamental principle of risk management. Applying it on a global scale enhances this effect by tapping into markets that react differently to world events. This approach helps investors achieve lower overall portfolio volatility while capturing opportunities that domestic markets cannot always provide.

Allocating capital internationally also allows investors to access unique growth opportunities in regions at different stages of development. Emerging economies, for example, may offer higher returns over the long term compared to mature markets.

• Reduces exposure to a single country’s economic cycle
• Mitigates currency and political risk through geographic dispersion
• Benefits from periodic outperformance over US stocks in non-US indices
• Enhances long-term returns by including high-growth and undervalued markets

Insights from 2025 Performance and Looking Ahead to 2026

The year 2025 underscored the power of global diversification. Non-US stocks returned nearly 30%, outpacing the S&P 500’s 16% gain. Weaker dollar dynamics, robust fiscal measures such as Germany’s $1.3 trillion package for infrastructure and green energy, and rotation away from concentrated US AI valuations fueled international equity rallies.

As we enter 2026, global GDP growth is projected at 2.8%, above consensus forecasts. Forecasters at Goldman Sachs and J.P. Morgan anticipate double-digit equity gains in both developed and emerging markets, driven by sustained growth, moderating interest rates, and renewed capital flows beyond the US.

Identifying Growth Themes and Regional Opportunities

Shaping the investment landscape in 2026 are several key themes. Recognizing these trends early can position portfolios to capitalize on structural shifts.

• Enduring opportunities from AI expansion as technology diffuses across industries
• ongoing relevance of future energy in renewables and efficiency
• Geopolitical shifts creating regional opportunities in multipolar trade networks
• societal transformations driven by demographics, longevity and AI labor impacts

Regionally, Europe is embracing a growth mindset fueled by fiscal support, tech and defense spending, and healthcare innovations. Emerging markets trade at attractive valuations—around a 15 P/E versus over 23 in the US—offering potential outperformance if global investors rotate abroad. Meanwhile, cities like Berlin, Paris, and London are emerging as startup hubs, bridging barriers even after Brexit.

Building a Globally Diversified Portfolio

Cultivating a truly global portfolio involves more than selecting a few international stocks. Investors can deploy capital across equities, bonds, property, commodities, and private markets to craft balanced exposures that match their risk profile.

Tools for implementation include global equity mutual funds, exchange-traded funds, and closed-end funds (CEFs) for targeted country or sector access. Private vehicles such as venture capital funds with tax-efficient structures can also complement public market holdings.

Each allocation can be tailored by region and sector to align with personal objectives. For instance, overweighting emerging Asia or undervalued South Africa can enhance returns when global conditions favor these markets.

Risks to Consider in International Investing

While global diversification offers compelling benefits, investors must weigh multiple risks:

• Geopolitical volatility and sudden policy changes
• Currency fluctuations that can erode returns
• Interest rate cycles and monetary policy divergence
• Home bias tendencies that limit opportunity sets

Emerging markets often deliver higher growth but come with greater political and regulatory risk. An informed approach involves mitigate major country-specific risks through careful allocation and ongoing research.

Practical Steps to Begin Your Global Investing Journey

Embarking on a global strategy need not be daunting. The following roadmap can help investors start confidently:

• Assess your current portfolio’s concentration and performance
• Define target allocations for developed and emerging markets
• Research funds and instruments with diversified country exposure
• Regularly wisely rebalance and adjust allocations based on market shifts
• Consult financial advisors to align strategies with tax and risk considerations

Integrating a global perspective equips investors to capture growth across cycles, industries, and geographies. By overcoming home bias and leveraging regional diversity, portfolios become more robust, agile, and positioned for long-term success.

As economic power shifts and new leaders emerge, the ability to pivot and invest across borders will define the next generation of successful investors. Embrace the global horizon and let diversification be the compass guiding your financial journey.