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My view currently is that of any time probably since late 90's, you have a pretty good divergence in valuation and trailing returns which favors adding in some non-US exposure. Even for individual stock pickers, adding some index exposure (in lieu of foreign values you can understand) makes sense IMO.

To how to allocate US vs. Overseas in an index portfolio, that's pretty much up to many kind of opinions, but I think would think you would at least start from global capitalization weighting... my default choice is "VT" (Vanguard Total World ETF): Per Morningstar, this fund is 45 / 55% US vs. non-US. I think that should be the starting point for an equity allocation if you are talking index funds.

If you wanted exposure overseas, I would want something very diverse which I think would zig vs. zag against US shares in a non-correlated way; my preference would be VSS (small cap / non-US) or DGS (emerging, small cap, dividend weighted). With VSS, you get an elclectic mix of businesses, still low ER, limited market impact of the ETF via trading (cap weighted, max holding size is <<0.5%). I think it's a good one-stop shop. Also, sector weightings are pretty spread... largest is industrials at 18% I think.

I have a sister w/ some good pensions and a large portfolio, I put her money almost exclusively into Indices for her non-managed money w/ me in a weight of:

Bonds ~20%
US ~45%
Intl ~35%

I think if you you are comfortable with some divergence, international (in general) poses a good opportunity vs. US these days... for my friends / clients who are more aggressive I have been suggesting higher weights for international in accounts that can't own individual securities. For individual stock pickers, it's not always so easy to get intl exposure, but buying VSS is a pretty trivial way to at least start stepping down the path while you search for individual securities...

I have been digging overseas more and more lately and I have also initiated a small position in VSS which I will use to source funds as I find good international names. (small though, 2%).

Ben
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