Undoubtedly, the U.S. equity market, which has gotten heavier in the big tech names, has been seen as a place to do incredibly well, especially when compared to the global markets. And while diversifying outside of the U.S. may still not be key to S&P-beating gains over the long run, I do think that it is worth considering what else is out there if you seek more diversification, lower price-to-earnings (P/E) multiples,
The WisdomTree Emerging Markets SmallCap Dividend Fund (NYSEARCA:DGS) solves three portfolio problems: international diversification, small-cap growth potential, and income generation through a 2.97% dividend yield. The Triple Mandate: Income, International, and Small Cap DGS tracks dividend-paying small-cap companies across emerging markets, combining three distinct investment exposures into one position. The fund holds over 1,000 companies spanning South Africa, Taiwan, Mexico, Brazil, Poland, Malaysia, India, and Saudi Arabia. No single holding exceeds 1.33% of the portfolio, ensuring genuine diversification.
However, for investors seeking more diversification, I think it can pay dividends (quite literally) to consider complementing a U.S. equity-heavy portfolio with some European names. Sure, going 100% (or close to it) in the U.S. names will grant you a front-row seat to America's long-term ascent, and there's nothing fundamentally wrong with doing so. However, I believe it doesn't hurt to add some international exposure as well for the value of geographic diversification and, perhaps more importantly, lower valuations.