The fact that investors hold modest amounts of foreign equity has been well documented. People simply are more comfortable investing in their home country, despite the potential benefits of increasing their international equity exposure.
Much has been written about the risks of a continued slide in the dollar given the massive amounts of debt that the U.S. government is taking on. However, a falling dollar is a big benefit to U.S. investors holding international investments as a result of the currency tailwind.
Consider the significant difference to performance that a falling dollar has made so far this year:
Source: The Economist, June 20, 2009, based on year-to-date national stock indexes through June 17, 2009
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