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iShares Core Balanced ETF Portfolio (XBAL $33.70)
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iShares Core 40/60 Moderate Allocation ETF (AOM $47.96)
I'm currently converting my 25 stock portfolio to just two Balanced All-In-One ETFs: XBAL and AOM. I've determined the GEO distribution is: XBAL (45%, 25%, 29%) and AOM (62%, 3%, 34%). A mix of XBAL and AOM will leave my portfolio with ~ 30% International exposure -higher than 5i suggests above.
I googled this to try to figure out why these Balanced All-In-One funds have 'higher' international exposure:
"J.P. Morgan Asset Management’s Long-Term Capital Market Assumptions suggest developed international stocks may produce better annual returns than U.S. equities over the next 10 to 15 years. The expected difference is about 1.4% annually – specifically, 8.1% for EAFE stocks (Europe, Australasia, Far East) versus 6.7% for U.S. stocks."
Your comments on this difference in international exposure would be most appreciated. Thank you.
We have nothing against a higher international allocation, as long as an investor is comfortable with currency risk and potentially higher volatility. Keep in mind our suggestions are general outlines only. International markets ARE cheaper, but until this year had seriously underperformed. But predicting a 10 to 15 year outperformance we think is more of a guess than a prediction. One thing that holds us back a bit is that in a 'crisis', investors tend to massively move back to the US for safety. This has happened for 100 years. Now, this could change, but until we see the next crisis (sorry) we don't really know. If the US remains a 'safe haven' then the US dollar could see strength. When this happens, international markets, particularly emerging markets, can lag, with currency impacting fundamentals. So, things are not quite as clear cut. But certainly we would have nothing against a specific investor having a higher allocation.