Foreign Investing: Keeping It Simple
by Ron Muhlenkamp
In 1995, investors were told that they should be invested in foreign stocks because for the prior 20 years, if you had invested in the S&P 500 index you would have earned 14½% per year (Table 1). But if you had invested in the MSCI EAFE (Morgan Stanley Capital International Europe, Australia and Far East) index, you would have gained roughly 16% per year.
So people said that youve got to invest in foreign stocks.
|Table 1. Comparative Returns for U.S. and International Stocks: 1975-1994|
|Standard & Poors 500 vs. Morgan Stanley Europe-Australia-Far East Index|
|Comparative Performance Over 20 Years: 1975-1994|
|Shading denotes the years when the EAFE outperformed the S&P 500.|
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