Katie Benner
By now investors who want a diversified portfolio know they should have a core international fund, but the idea of what that core fund should look like has changed as much as Wall Street's attitude toward overseas investing.
Rather than focusing on a basic large-cap international fund, investors should have small-caps and emerging markets as a core part of their portfolios, fund experts say, even amid recent outflows and risk worries. This type of overseas buying is considered part of a long-term strategy, rather than about chasing momentum, says Quincy Krosby, chief investment strategist at Hartford Financial. "On a secular basis, having emerging markets in a portfolio is important and crucial to a diversified portfolio because many top consulting firms have found that over the next 10 to 20 years, a good portion of the top global brand names will come from emerging markets," Krosby says. "An investor wants to be there early on for the chance to capture gains under a variety of conditions, and you can only do this by having a broadly diversified portfolio in international markets." She also notes that McKinsey research has shown that China and India alone will be 50% of global gross domestic product by 2025. Meanwhile, U.S. growth has lagged behind many other countries for years. "We want clients to go in and establish a position in international investments when valuations are down and you have a safety margin," she says.
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