When we talk about investing, it’s easy to focus on the S&P 500 or the U.S. stock market as a whole. After all, America has long been viewed as one of the best places to build and grow a business. But if we zoom out and look at the broader global investing landscape, there’s much more to explore—and possibly profit from.
Let’s take a look at where the U.S. market stands today, what the forecasts suggest for the future, and what alternative strategies might help investors better weather volatility while still pursuing long-term growth.
U.S. Stocks: Still Strong, but Possibly Overvalued
The U.S. stock market has enjoyed a spectacular run in recent years, particularly driven by a small group of large-cap tech companies. But with price-to-earnings (P/E) ratios now stretched beyond historical norms, many investors are wondering: how much room is left to grow?
Even the famously conservative Vanguard Group has weighed in. Each year, they offer a 10-year forecast for various investment categories. Their latest outlook might raise some eyebrows:
- U.S. Equities: 2.8% – 4.8% annualized return
- Global Equities (Ex-U.S., Developed Markets): 7.3% – 9.3%
- Emerging Market Equities: 5.2% – 7.2%
- Global Bonds & U.S. Bonds: 4.3% – 5.3%
The takeaway? Vanguard sees higher potential returns outside the U.S.—in both stocks and bonds—over the next decade.
Why International Investing Might Be Worth Another Look
A big reason for this forecast shift is valuation. International markets, particularly in Europe and parts of Asia, are trading at a significant discount compared to the U.S. The Vanguard Total International Stock ETF (VXUS), for example, has a P/E ratio of around 15.9, compared to 30+ for many U.S. large-cap tech stocks. That’s almost like finding quality merchandise on sale at half price.
Of course, a lower P/E ratio doesn’t automatically translate to better performance. It simply means those stocks are priced more conservatively. And while valuation does matter in the long run, it’s not a crystal ball. Vanguard has been issuing similar predictions about international outperformance for years—and so far, U.S. stocks have continued to outperform, particularly because the AI and tech boom has been disproportionately concentrated in American companies.
Enter the Betterment Strategy: A Real-World Diversification Test
Over the past decade, I’ve personally tested an alternative approach to investing through Betterment, one of the leading robo-advisors. The idea was simple: instead of putting all my chips on U.S. stocks, why not spread them across a globally diversified portfolio, including bonds, international equities, and emerging markets?
The appeal of Betterment isn’t just about diversification. Their platform also automatically rebalances the portfolio and offers tax-loss harvesting to increase efficiency. On paper, this should yield slightly higher returns with lower volatility and better tax treatment over time.
So how has it performed?
In short: respectably, but not spectacularly.
The U.S.-only portfolio, driven by the tech juggernauts and relentless optimism in Silicon Valley, has outpaced the globally diversified approach—at least for now. The Betterment portfolio, with its exposure to underperforming bonds and foreign markets, has naturally lagged a bit behind. That said, it still offers a smoother ride and remains a reasonable bet if you believe global markets will eventually catch up.
As of now, the weighted average P/E ratio of the Betterment core portfolio sits at around 22. That’s a middle ground between the pricey U.S. tech sector and the more affordable international markets—suggesting a balance between growth potential and value.
A Case for Patience and Perspective
What all of this points to is a broader truth about investing: no single strategy works forever. Sometimes U.S. stocks lead the way. Other times, international or emerging markets take the spotlight. Bonds may look boring, but they offer stability and income, especially when interest rates rise.
Vanguard’s projections—and even the experience with Betterment—don’t guarantee anything. But they do encourage us to think beyond the immediate hype and consider longer-term fundamentals. When an asset class is historically cheap (like international stocks are today), it may be setting up for stronger relative returns in the future.
So, What Should You Do?
There’s no one-size-fits-all answer, but here are a few practical steps to consider:
- Review Your Portfolio’s Balance: If you’re heavily invested in U.S. stocks, consider adding some international exposure. It doesn’t have to be a major shift—just enough to capture some of the potential upside abroad.
- Think Long-Term: Don’t chase the latest trend or panic over short-term underperformance. A well-diversified portfolio is like a well-built house—it can weather different kinds of storms.
- Explore Tools Like Robo-Advisors: Platforms like Betterment can simplify rebalancing, tax optimization, and diversification. They’re especially helpful if you’re busy or don’t want to actively manage your investments.
- Stay Humble: Even the smartest analysts and firms get their forecasts wrong. So don’t put all your faith in predictions—use them as guidance, not gospel.
The Big Picture
Markets go through cycles. Strategies rise and fall in popularity. And even when we try to build the perfect portfolio, unexpected events—like pandemics, wars, or technological revolutions—can rewrite the rules overnight.
What doesn’t change is the importance of staying informed, staying diversified, and staying invested. Whether you’re betting on U.S. innovation, international recovery, or the slow-and-steady bond market, success often comes down to patience, discipline, and a clear understanding of your goals.
In the end, the best strategy isn’t the one that outperforms every year—it’s the one you can stick with for decades.
