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Yes, you're right, US stocks offer some international diversification, but the US market doesn't have 100% correlation with international markets, so you can add diversification, and possibly reduce risk, by adding international stocks. Think of the world as one big market. If you just own US stocks, you are ignoring half of that market.

I wouldn't try to guess whether bond funds are "high" or "low" right now. Nor would I try to time the economy. Just put your age-10 in VBMFX, the rest in US and foreign stocks. I diversify into real estate by owning a home, but REITs may be a good idea, too.


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