Vanguard Recommends Investors Increase Non-U.S. Holdings to 40%

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Bloomberg – Investors should put about 40 percent of their portfolios in non-U.S. stocks and bonds to diversify their holdings, according to top executives at Vanguard Group, the fund giant that manages $4.9 trillion.

Global stock markets are likely to outperform the U.S., which the firm expects to return roughly 4 percent to 6 percent annually over the coming decade, Chief Executive Officer Tim Buckley and Chief Investment Officer Greg Davis said Thursday during a webcast.

Vanguard formerly recommended allocating about 30 percent of portfolios to non-U.S. assets, the executives said. One reason for the increase: Fees have fallen on international funds, improving net returns.

Other comments from the Valley Forge, Pennsylvania-based firm:

Expect volatility to continue in 2019. Last year was normal, while the low volatility of 2017 was an aberration. Stay invested. “Going all cash is way too risky,” Buckley said. Long-term U.S. Treasury yields are likely to rise as supply grows with an expanding deficit and foreign buyers diminish. The government shutdown is likely to slow U.S. growth by 0.1 percent or more per week. Competitors cut fees to zero on some funds as a marketing tactic, but Vanguard won’t go that low. “We’ll continue to do what we’re doing,” Buckley said.