Among the many money moves considered by investors to strengthen and diversify their portfolio, the option of investing in international stocks has gained significant traction in recent years.
During the first half of 2025, global equities largely outperformed U.S. stocks, even as the U.S. market reached record highs. In fact, the MSCI ACWI ex-USA Index returned 16.6% compared to the S&P 500’s 7.1% gain in H1 2025, driven in part by growth in AI and overseas defense spending in the European Union. While several other factors have also contributed to this trend, it showcases the increasing appeal of diversifying one’s investment portfolio through international markets.
There are many opportunities for growth beyond the U.S. market, but understanding the nuances of these options is essential for achieving your financial goals.
Why go international?
As Andrew P. VanWazer and William M. Smith write for J.P. Morgan, “Heavy allocations to U.S. stocks, especially in passive index formats, often come with more exposure to a few dominant firms than investors realize. Adding global holdings can help smooth performance across different economic conditions, innovation winners, interest rate paths and policy environments. That doesn’t mean turning away from U.S. markets; it simply means building in more flexibility in case leadership shifts or volatility continues.”
The reasoning behind looking beyond the U.S. market largely comes down to diversifying your investment portfolio. Diversification has long been cited as the best way to reduce risk associated with market volatility, while also potentially leading to higher long-term returns by capturing gains from multiple market segments.
For example, during the “lost decade” from 2000-2009, the S&P 500 actually had a negative return because of the dot com crash and the global financial crisis of 2008. Despite this, many international stocks and emerging markets yielded positive returns at that time. Those who diversified were able to offset losses.
VanWazer and Smith suggest that most investors should opt to allocate about 25% to 30% of their portfolio to non-U.S. equities as they begin the process of diversifying their investments internationally.
This practice helps investors avoid concentration risk — or having too much of their portfolio associated with a particular geographic area or asset class (in this case, the United States). With U.S. markets representing roughly 70% of total global market capitalization and Nvidia’s market cap larger than many countries’ entire stock markets, it can be tempting to focus investments in these large areas. But doing so also brings added risk should these large market cap areas experience a loss in valuation. International diversification helps offset potential losses if these areas stagnate.
What options are available beyond the US stock market?
While a diversified portfolio that goes beyond the U.S. stock market can have significant long-term benefits, many investors find themselves at a loss of where or how to begin. Of course, investors can further diversify by investing in foreign companies and stock exchanges.
Worldwide, there are 60 “major” global stock markets, including those in the United States. Some of the top trading exchanges include the Tokyo Stock Exchange (a gateway to automotive and electronics giants like Toyota and Sony), the London Stock Exchange (which lists companies from 60 countries and 40 sectors), and Euronext (Europe’s largest stock exchange, based in Amsterdam). China is home to three major stock exchanges, including one in Hong Kong (giving access to securities exchanges and emerging markets).
In addition to international stock exchanges, many international companies are also listed domestically. For example, The New York Stock Exchange lists over 530 international companies from 48 countries.
How to invest beyond the US market
While there are many investment opportunities beyond the traditional US market, getting started can be intimidating for some investors. Fortunately, this can be easier than one might expect.
For investors wanting to invest in foreign companies, the most convenient option is generally to buy an American depository receipt (ADR), which is used by many foreign companies when they try to establish a presence in a U.S. exchange. ADRs are listed on American exchanges, with each ADR representing a set number of underlying shares. Companies like Spotify (Sweden) or Toyota (Japan) or two examples of foreign companies that make ADRs available to American investors.
Similarly, global depository receipts (GDRs) are often used by foreign companies wishing to establish a market exchange presence in Europe. These depository receipts are also available to American investors.
U.S. investors can also directly purchase foreign stocks by opening a global account with a U.S.-based broker, or by working with a local broker in the country whose exchange they wish to invest in. Internationally-focused mutual funds and ETFs, such as the Vanguard Total International Stock Index Fund (VXUS), typically focus on specific countries or regions to help investors diversify.
As Investopedia warns, however, direct investment opportunities tend to be more complex than buying ADRs, and often come with higher fees. Investors also need to consider currency conversions and tax implications for such investments. Just like with any other investment, investors should perform extensive research to assess the risk and growth potential of these international opportunities.
Diversifying for a stronger portfolio
Diversification has long been considered one of the most important aspects of a well-rounded, growth focused investment portfolio. While today’s U.S. market is increasingly tech dominated, exploring growth in international marketplaces, cryptocurrency and other alternative options is proving to become an increasingly viable way to achieve the level of diversification needed to manage the ups and downs of the market.
While exploring growth outside the U.S. market brings its own risks and challenges, those who take a measured approach to this form of investing may find themselves better positioned to achieve their desired goals. By using an investment strategy that aligns with your own experience level and risk preferences, you can make these additional investment opportunities work for you.
