International stocks have underperformed domestic stocks in recent years and the benefits of global stock diversification have been less apparent. Historically, domestic and international stocks have alternated in the top ranking of performance. In the 1980s international stocks outperformed. The trend was reversed in the 1990s and, just like today, claims about the sufficiency of domestic only stock portfolios were common; but then early in the 2000s international stocks outperformed once again. From a valuation perspective, international equities continue to sell at a discount to US stocks. As economic growth is slowly awakening in Europe and Asia, the case for global diversification re-emerges. The benefits of global diversification occur over the long run. Investors with a long time horizon should include stocks of leading companies domiciled in other countries. Since domestic and international stocks are exposed to different economic and market forces, their returns have not been perfectly correlated. An allocation to foreign stocks lowers portfolio volatility, leading to higher-risk adjusted returns over the long term. The proper investment response, in our opinion, is to build well diversified portfolios of domestic and international equities. This approach helps keep your portfolio positioned to produce attractive returns in a changing global economic environment.