Non-US companies are about 38% of the world’s stock market, yet many American savers hold far less. Here is the evidence on home bias, the range of sensible international weights, the main ETFs and how they differ, currency risk, the foreign tax credit, and what the 2000s and 2010s each taught.
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If you want your stock portfolio to own the whole market rather than one country, yes: most diversified retirement portfolios hold some international stocks. How much is a judgment call. Professionals land anywhere from about a fifth of stocks to full market weight, and the evidence supports a range, not a single number.
Scope. US savers choosing US-listed ETFs for a 401(k), IRA or taxable account, with data as of October 2026. Not covered: single-country and thematic funds, currency-hedged stock funds in depth, and investors living outside the US. Education, not personal advice.
| International share of stocks (as of Oct 2026) | Who tends to use it | Trade-off |
|---|---|---|
| 0–10% | Investors who see US multinationals as enough foreign exposure | All results tied to one economy and currency |
| About 20–25% | A common middle ground; close to how US fund assets are split | Some diversification, still a strong home tilt |
| 30–40% | Vanguard’s range for most of the benefit; its target-date funds use 40% | More currency and foreign-market swings |
| About 38% (market weight) | One-fund holders of VT or a global index | No home bet at all; lagged badly in the 2010s |
Sources: Vanguard target-date fund construction (“allocations of 30% to 40% to international stocks have provided more than 95% of the benefit of full market-cap diversification”); Vanguard VT fact sheet (US 62.4%, Sep 30, 2026).
Home bias is holding more of your own country’s stocks than its share of the world market. Morningstar counted $12.5 trillion in US equity funds and $4.2 trillion in international-stock funds in September 2021, a 75/25 split, when the FTSE All-World Index was 59% US and 41% non-US (Morningstar, 2021). The US share of the world has risen since: VT, which follows the FTSE Global All Cap Index, was 62.4% US in September 2026.
Home bias is not always irrational. You spend dollars in retirement, foreign funds can cost a little more, and many US companies earn abroad. The risk is that it often follows recent returns. After international stocks rose 32% in 2025 against 17% for the US market, US investors added $57 billion of net inflows to international-stock funds that year (Morningstar, Feb 2026). Picking a share in advance and rebalancing to it avoids chasing whichever region just won.
One total-international fund is enough for most people. Splitting into developed and emerging funds lets you set your own emerging share, but the index rules then matter. Expense ratios, index, stock counts (Sep 30–Oct 23, 2026) and 5-year NAV returns (per year, to Sep 30, 2026) from the issuers; 2022 calendar-year returns from Exent market data.
| ETF | Covers | Index (issuer) | Expense ratio | Stocks | 5y/yr | 2022 |
|---|---|---|---|---|---|---|
| VXUS | All non-US, incl. small caps | FTSE Global All Cap ex US | 0.05% | 8,901 | 9.35% | −16.1% |
| IXUS | All non-US, incl. small caps | MSCI ACWI ex USA IMI | 0.07% | 4,580 | 9.36% | −16.5% |
| VEA | Developed, incl. Canada and Korea | FTSE Developed All Cap ex US | 0.03% | 3,903 | 10.32% | −15.4% |
| IEFA | Developed, excl. Canada and Korea | MSCI EAFE IMI | 0.07% | 2,625 | 9.04% | −15.2% |
| VWO | Emerging, excl. Korea | FTSE Emerging Markets All Cap China A Inclusion | 0.06% | 6,507 | 6.62% | −18.0% |
| IEMG | Emerging, incl. Korea (21%) | MSCI Emerging Markets IMI | 0.09% | 2,853 | 8.79% | −20.0% |
| VT | Whole world, 62.4% US | FTSE Global All Cap | 0.06% | 10,185 | 11.34% | −18.0% |
The biggest practical difference is South Korea: FTSE funds (VEA, VWO) treat it as developed, MSCI funds (IEFA, IEMG) as emerging, so mixing VEA with IEMG double-counts it and IEFA with VWO leaves it out. Stick to one family when you split. VXUS and IXUS avoid the issue entirely. The VEA-vs-VWO 5-year gap is a period result, not a rule. Fund-level detail is in VXUS vs IXUS, VEA vs IEFA vs SCHF and VWO vs IEMG; for one-fund options, see VT vs VTI and VXUS and one-ETF retirement portfolios.
It flipped. In the 2000s non-US stocks won clearly; in the 2010s the US won by a wide margin. Morningstar notes that in the first decade of this century its US Market Index “logged a negative return” while its Global Markets ex-US Index rose 40% (Morningstar Indexes, Jan 2026). Exent market data, ETF total returns with dividends reinvested:
| Period | S&P 500 (SPY) | Developed intl (EFA) | $100k at 80% US / 20% intl | $100k at 60% US / 40% intl |
|---|---|---|---|---|
| 2002–2009 (8 years) | 1.6% a year | 6.4% a year | $122,500 | $132,000 |
| 2010–2019 | 13.4% a year | 5.4% a year | $307,000 | $266,200 |
| 2020–2025 | 15.0% a year | 8.8% a year | $217,800 | $204,400 |
| All 24 years, 2002–2025 | 9.7% a year | 6.6% a year | $818,900 | $718,300 |
Notes: EFA starts in August 2001, so the first window is 2002–2009; the S&P 500 alone returned −1.0% a year over 2000–2009. Mixes are hypothetical, rebalanced every January 1 (our calculation); a 100% US portfolio turned $100,000 into about $925,500 over the 24 years. EFA is developed markets only. Over any single decade the winner was obvious only afterwards. In 2025 the order flipped again: VXUS returned 32.3% and VTI 17.1%. Longer history is in US vs international returns, decade by decade.
Currency. A US investor in a foreign stock earns the local return plus the change in that currency against the dollar. If a European stock is flat in euros and the euro rises 10% against the dollar, a US holder gains about 10% (illustrative). The reverse also happens. The broad stock funds in the table are not labelled as hedged, so their returns include these moves; for bonds, where currency swings would swamp the income, Vanguard’s BNDX “employs hedging strategies” (Vanguard). For a retiree spending dollars, currency is a reason to hold less than market weight abroad, not a reason to hold none: a falling dollar is exactly when foreign assets help.
Foreign tax credit. International funds pay foreign withholding taxes. In a taxable account you can usually claim a credit, and the IRS lets you skip Form 1116 if all your foreign income is passive, reported on a payee statement such as Form 1099-DIV, and creditable foreign taxes are no more than $300 ($600 joint) (IRS Form 1116 instructions). Foreign taxes paid inside an IRA or 401(k) can’t be claimed (Schwab).
Vanguard figure from its 2025 foreign tax credit table. This is one reason household planners often hold international ETFs in taxable accounts first; see tax-efficient ETFs for a taxable account.
Hypothetical illustration, not advice for everyone your age. Leon is 55 with $600,000 in stocks inside his IRA and rollover 401(k). He is deciding between 20% and 40% of stocks abroad.
| 80% US / 20% intl | 60% US / 40% intl | |
|---|---|---|
| Holdings | $480,000 VTI + $120,000 VXUS | $360,000 VTI + $240,000 VXUS |
| Weighted fee | 0.8 × 0.03% + 0.2 × 0.05% = 0.034% ($204/yr) | 0.6 × 0.03% + 0.4 × 0.05% = 0.038% ($228/yr) |
| If the next decade looks like 2002–2009 | $600k → about $734,800 | $600k → about $791,900 |
| If it looks like 2010–2019 | $600k → about $1,842,200 | $600k → about $1,597,400 |
Arithmetic: $600,000 × the growth factors in the decade table (1.2246 and 1.3198 for 2002–09; 3.0703 and 2.6624 for 2010–19), using SPY and EFA as stand-ins. The fee difference is $24 a year; the outcome difference is hundreds of thousands, in either direction. Leon cannot know which decade comes next, so the real question is which regret he could live with and which mix he would rebalance through. Both mixes need annual rebalancing, best done inside the IRA where trades are tax-free.
Counterexample: a 401(k) whose only international option is an actively managed fund charging 1% a year. On $100,000, that is $1,000 a year against $50 for VXUS. Here it is usually better to hold US index funds in the 401(k) and put the international share in an IRA or taxable account, where VXUS or IXUS is available, keeping the household total on target. Active international funds did better than US ones recently (49% of international funds trailed their benchmark in the first half of 2026, per SPIVA), but a 1% fee is a high hurdle over decades.
Limitations. The decade table uses ETF prices from 2002, so it cannot show the 1970s–1990s; EFA excludes emerging markets and Canada. Past returns are not forecasts. Tax rules are federal and current for 2025–2026 filings.
An international share is a decade-long commitment that will look wrong for years at a time, as the 2010s showed; keeping it means understanding what is driving the gap, including the dollar.
There is no single answer. Common choices range from about 20% of your stocks to the global market weight of about 38%; Vanguard’s research found 30% to 40% captured more than 95% of the diversification benefit.
It is a broad, low-cost way to hold non-US stocks: about 8,900 companies in developed and emerging markets for 0.05% a year. It returned 9.35% a year over the five years to Sep 30, 2026 (Vanguard, NAV) and fell 16.1% in 2022.
They do the same job. VXUS tracks a FTSE index and costs 0.05%; IXUS tracks an MSCI index and costs 0.07%. The main difference is how each index classifies a few countries such as South Korea.
Not strictly, but the S&P 500 is one country. In 2000–2009 it returned about −1.0% a year while developed international stocks gained, and in 2025 VXUS returned 32.3% against 17.1% for VTI.
Many people prefer taxable accounts because foreign taxes withheld can be claimed as a credit there; inside an IRA or 401(k) that credit is lost. Bonds usually have a stronger claim on IRA space.
Their swings were similar in recent crashes, plus currency risk. In 2022 VXUS fell 16.1% and VTI 19.5%; emerging-market funds such as IEMG fell 20.0%.
Holding more of your own country’s stocks than its share of the world market. In 2021 Morningstar found US fund assets split about 75% US and 25% international, when the global index was 59% US.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.