How global diversification helps manage risk and capture opportunity

Jessica Sclafani: Welcome to CONFIDENT CONVERSATIONS® on Retirement. I'm your host, Jessica Sclafani. As a retirement strategist, I've spent years helping people make sense of retirement, both the numbers and the emotions behind them. Together with my colleagues, we’ll explore practical insights to help you retire confidently. Today we're talking about global diversification. In other words, why investing beyond U.S. borders still matters. Even after a decade where the U.S. has led performance, the global investment landscape is shifting, which offers us all opportunities as long-term investors, but also raises some important questions. To help us make sense of it all, I'm joined by two wonderful colleagues today, Som Priestley, head of Global Investment Solutions Americas and a portfolio manager in our Multi-Asset Division, as well as a Chartered Financial Analyst®. And Roger Young, a CERTIFIED FINANCIAL PLANNER® professional. Welcome, Som and Roger.

Som Priestley: Thanks, Jessica. Happy to be here.

Roger Young: Yes, thanks. Glad to be part of the conversation.

Jessica Sclafani: Well, I am glad to be joined by both of you. Before we dig into the fundamentals, I'd love for our listeners to get to know you both a little bit. Can you share a few thoughts about your backgrounds and what excites you about the international investing landscape today? Som, why don't we start with you?

Som Priestley: Sure. So at a high level, as a portfolio manager, really my job is to help investors allocate their capital across various asset classes and regions based on their relative attractiveness. So we allocate portfolios for our clients, and then we adjust those portfolios as markets evolve and various risks and opportunities can develop. Why I'm excited about international right now is for a few different reasons.

One is I see a growing, broadening opportunity. We've had a long period of U.S., and especially technology outperformance over the last five to 10 years, and that's pushed a lot of investors to develop more home country bias or more allocations in the portfolios toward U.S. versus non-U.S. or international exposure. Our view is that relative attractiveness has been shifting.

International equity valuations are attractive. We're seeing earnings trends outside of the U.S. starting to stabilize and grow, meaning that those companies are starting to become more and more profitable. And we're seeing policy support. So, the governments of many of those nations and their policies across interest rates and fiscal measures are starting to also improve the backdrop.

Jessica Sclafani: Thanks, Som. I'm intrigued to hear more, and I think we should spend some time on what you talked about with that growing home country bias. Roger, why are you excited about international investing today?

Roger Young: Well, in my group, we helped develop our firm's perspectives on financial planning, particularly for individuals. So that includes helping people to make informed retirement decisions. Diversification is always a key part of that. So I'm excited to talk about the diversification part. Now before joining T. Rowe Price, I served individuals directly. So for about 15 years now, I've been hearing people question why they need to own international stocks.

And like Som said, that question is especially relevant today. I think you make some great points about the opportunities, and it's important to remember that the performance of asset classes can have cycles, perhaps very long cycles. When you think about your retirement, that's a very long perspective. So global diversification can help smooth the ride over that long time horizon.

Jessica Sclafani: Diversification. I have a feeling we're going to talk about that a lot today. And that is certainly one of the most favorite words that you'll hear walking around the halls of T. Rowe Price. That's really great context from both of you to get us started off today. From here, let's just dive into the basics, which are generally a great place to start.

When we talk about international investing. What exactly does it mean? And then to take that a step further, why should it matter to someone who's building their retirement portfolio?

Som Priestley: Sure. So when we talk about international investing, we're talking about owning companies and assets outside of the U.S. in developed markets such as the United Kingdom and Japan, but also in emerging economies such as China, India, and Brazil. This matters because while the U.S. is very important, it only makes up about 60% of the global stock market, which means that a big portion of the investment opportunity is beyond the U.S.

So for someone building a retirement portfolio, diversification is important. As Roger said, it's not putting all your eggs in one basket. Diversification means exposure to countries and companies that are growing at different rates, facing different economic challenges, and offering different types of opportunities. So when one part of the world might be slowing down, being diversified means that you might have exposure to other areas of the global economy and capital markets that are increasing. International investing also is a way to provide exposure to different types of companies across various sectors.

So if we look at the U.S. stock market, for example, it's very heavily tilted toward technology investing. If you look out to international markets, you'll see greater weights toward areas like industrials, financials, and even healthcare companies. A couple of examples just to bring this to life, make a little bit more tangible. I think one great one is Nestlé.

So, this is a Swiss company and it's also one of the world's largest food and beverage companies. So they, while based in Switzerland, distribute their products across the globe. Another one is Taiwan Semiconductor, which manufactures the chips that power almost all of our modern technology, including our iPhones and is a leader in the semiconductor space. So these are global leaders that are shaping the economy, but they don't show up in S&P 500.

So international investing isn't about making just one big bet on one country. It's about building a more balanced and resilient portfolio that can benefit from growth wherever it happens.

Jessica Sclafani: So, Som, did you choose two companies that both make chips necessarily?

Som Priestley: Did I say chips for Nestlé.

Jessica Sclafani: No, I'm making a joke.

Som Priestley: Chocolate chips. Oh, oh.

Semiconductor chips.

Jessica Sclafani: Come on. I'm trying to make sure that listeners are still with us.

Roger Young: Still diversified across different types of chips.

Som Priestley: But chips? Yes.

Jessica Sclafani: Yeah. Som, you didn't realize that I was the comic relief here, right? Diversification across chips. OK, I like it. I also, more seriously, really did like the analogy about not putting all of your eggs in one basket. I find that to be a really helpful way to think about diversification from a practical perspective. Roger, how do you think about the concept of portfolio diversification?

Roger Young: I think you can think about it in a number of ways, beyond the chips thing. I have in front of me one of my favorite tools to illustrate the way things work in different asset classes over time, and we call this a quilt chart.

Jessica Sclafani: And I'm just going to stop you here for a second, Roger, because I think it's important for all of our listeners to know that you're actually kind of clutching the quilt chart page in your hand right now and smiling at it, so I can tell this is a resource that you really appreciate. Tell us more.

Roger Young: Yeah, I'm smiling at all the pretty colors here in the quilt chart. So the way this works—going across you have the last 10 years. Each year has a column and then going down you have different asset classes. You have different color coding for each of those asset classes. So, for example, on this chart there are blues and greens for stock categories and reds and purples for bonds and different places around the world, different size companies, things like that.

There are eight of them here. When you look at this, it looks like a quilt. That's why we call it that. So what does that tell you? It means there's not really a discernible pattern year to year, of which of these asset classes is going to do better than the other ones in the next year. Now, certainly, we have to acknowledge, as I'm looking at this, over these 10 years, 2016 to 2025, U.S. large-company stocks have done very well there at the top for five of those 10 years, but that means they weren't at the top in the other five.

And in those other five years, there was at least one category of international stocks or bonds that did better. So what we say to folks is, if you want to have a diversified portfolio that can help you avoid betting on any one particular type of asset class, and you can do reasonably well through that diversification over time.

Jessica Sclafani: It's really helpful, Roger, and I can see the quilt chart based on the way you described it. So thank you for sharing that. So we've talked a little bit about performance and how that looks different from one calendar year to the next. Now, I think it would be helpful for us to acknowledge the perception component of the equation here.

I get the impression that many investors feel hesitant about international investing, especially after we've seen the U.S. markets do so well, more recently. And I also just to acknowledge the elephant in the room here, it's fair to say that we've seen a rise in geopolitical tensions around the world, which could also impact how investors or individuals are thinking about investing in companies outside of the U.S.

And just to ground this discussion in the moment that we're recording mid-2026, we're seeing ongoing developments in key regions, including around the Strait of Hormuz, which can affect energy markets and investor sentiment, right? This is just screaming at us in the headlines right now. And these types of headlines can really feel disruptive and a little bit scary, intimidating in the short term for investors who are thinking about moving beyond the U.S.

So, Roger, I'm coming back to you. How do you think about investors’ potential hesitancy when it comes to international investing?

Roger Young: We can think about it in a few different ways. One, like Som mentioned, economies are a big part of this. An argument I sometimes hear is that many parts of the world are stagnating economically. So, for example, a lot of experts predict that populations in major parts of the world are actually going to decrease in the next 10 to 15 years, and that includes Europe, Japan, and maybe even China. And that's certainly a big factor in the potential for investment returns, but it's hardly the only one. The world is very interconnected, even today, with everything you've been talking about. And with some things that have made it maybe less interconnected or more tense, but still interconnected, and I think investors can benefit from looking beyond those macro trends to what great companies are doing, like Som was saying.

The other aspect I'll bring up and touch a little more on something Som mentioned, is the biases that people have, and a few in particular are really relevant. One is that home country bias. We generally tend to prefer things that are familiar to us. And similarly, there's availability bias, the availability of information. It's easier for people in the U.S. to think about U.S. companies that they do business with, or that they see in the media.

They might forget about Nestlé, for example, even though it is somewhat familiar. So a related concept to these is recency bias, where you expect that the U.S. dominance we've seen will continue indefinitely. And of course, we've seen many examples over long periods where that did not work out. Japan in the 1980s, for example, did not continue indefinitely outperforming.

So all of these biases can push investors to be overly concentrated in U.S. stocks. And I think people need to guard against that.

Som Priestley: Yeah, I mean, I think it's a great point. Investors are going to naturally chase recent winners, which is related to the recency bias. And that can cause timing errors, where folks will start to continually buy into areas of the market that have been working well and overlook those that might be improving under the surface. And we've seen this over time that market leadership will rotate.

Thinking back to your quilt chart there in the early 2000s is a great reminder where we would have seen international equities outperforming the U.S. actually for quite, quite an extended period. You know, familiarity is interesting as well. I mean I think there are, you know, comforts in our everyday lives also that perhaps we overlook even the cars we drive, right.

Driving a Toyota or a BMW, if you're fortunate enough, many of us are exposed to non-U.S. companies on a daily basis. From an investment perspective, though, there are some key considerations around this. I think one of the main ones, and one of the risks that we're seeing is the concentration in the market. Today, if you look at the S&P 500 index, for example, so the broad U.S. large-cap space, the top 10 stocks make up 40% of that market. If we went 20 years ago that would only have been 20% of that market. So by investing globally we're diversifying that risk. We're reducing our concentration risk. And we're opening up our investors to some of those other investment opportunities that perhaps have not participated as well in the recent environment.

Jessica Sclafani: Som, I think I have to repeat that for our audience. You said the top 10 U.S. stocks now represent was it 40% of the U.S. stock market?

Som Priestley: That's right.

Roger Young: Well, large-company stocks.

Som Priestley: Large companies, yes.

Jessica Sclafani: Right. The S&P 500. That's significant. And I'm not sure that everyone realizes that. My other reaction just listening to both of you is that it's really helpful to acknowledge these inherent biases that we all have, as we typically don't even realize that that's how we're behaving. As you're pointing these things out, particularly recency bias, I find myself nodding my head.

It's really relatable. So why don't we take a moment here to roll up our sleeves and talk about what an appropriate international allocation could look like today? Som, I'm going to come back to you, what would you typically suggest for the average investor?

Som Priestley: Sure. So you know, we don't necessarily obsess over finding the perfect percentage, but trying to find the right balance for the investor. I think a good starting point is the global market. So if about 60% of the global market is in the U.S. equities, currently, about 40% of that is international. Now from there, it is prudent to consider an investor's comfort with non-U.S. investing.

There can be reasons to have a home country bias, and so we'll flex that range in terms of the client and their comfort levels. So I would say a typical range for us would be more about 20% to 40% in that international equity exposure. I think the most important thing here is to keep investors invested, right? We don't want to put investors in a position where they're uncomfortable or abandon the asset class.

So for us, it's maintaining that exposure, having it as a continuous allocation to portfolios, but then also not dipping too low and increasing our concentration or our risk again, back to a single country or region.

Roger Young: Som, I like how you mentioned the behavioral side and kind of meeting people where they are not trying to over correct for them and make them perfect. No perfect number. I looked at the chart here, my quilt chart, actually does have what we view as a representative, diversified portfolio and doing the math on that, international stocks here in this portfolio are about 30% of the stock exposure.

So that's right in the middle of that 20% to 40% range. It's not all the way to the 40% that you said was international share of the global market. So it is good to hear we recognize people do have these biases and we have to adapt to that at least somewhat.

Som Priestley: Yeah, that's right. You know where I would get nervous is, you know, clients that have international exposure around 0% or 10%. You want them to have a certain level. And agree 30% is right in between 20% and 40%, so a bit of a sweet spot.

Jessica Sclafani: There is no magical number here, but it would be reasonable to say that you could pick a long-term target, somewhere in the range of 20% to 40% for an international allocation, for most people. So, with that as a bit of context, Roger, I'd like to come to you now, and can you walk us through how we would implement that type of allocation?

Roger Young: To get an allocation like that, especially if you're starting from a low number, I think simple is often better, especially up front. So you might want to keep it broad, get that wide exposure to international stocks. Maybe it's just one or two funds that cover large swaths of international and emerging markets. Maybe two funds, one international developed, one emerging as an example.

You don't necessarily have to go into the detail, of all of the different regions and all of the sizes of companies, all the sectors. You can get a broad exposure pretty easily. Another thing to think about the implementation of this is keeping on top of it over time. That includes rebalancing, which is also important, it's a fundamental of what we talk about in financial planning.

Rebalancing provides you some risk management. It keeps you from having much more than you initially intended in a particular type of investment. Also, rebalancing can actually help you seize buying opportunities if something has fallen in price, say more than it should have, so to speak. It's hard to say what “should have” is, but if it's fallen disproportionately and there's some hope of a rebound. The challenge that people have with taking advantage of rebalancing sometimes is they're trying to do it on their own and using their own judgment without having a plan.

So again, you can fall victim to those behavioral biases. It's very easy to talk yourself out of rebalancing. You might say, “you know, I know I should rebalance, but U.S. stocks have really done well and maybe they're going to keep going.” So in that case, if you're prone to that, a systematic approach would be a good thing to consider. If you can't do it on your own, you might talk to a trusted advisor to help you do it.

Jessica Sclafani: Roger, I think we can all relate to examples where the first part of the thought or the sentence is “I know I should, but dot dot dot” right? So again, I think it's really helpful that we talked about these inherent biases that we can all unintentionally fall victim to like home country bias, availability bias, recency bias, just as a couple that we've covered so far.

But if I had to summarize what you just said, I think from an implementation perspective, you're saying keep the implementation broad and simple and then where possible, rebalance systematically instead of reacting more emotionally. Does that sound about right?

Roger Young: That's a great recap.

Jessica Sclafani: OK. But again like we talked about there are some headlines out there and lately these headlines can feel like they're kind of screaming at you off the computer screen or the newspaper. Another headline that has jumped off the page, particularly over the last few years has been around tariffs.

And yes, I did just bring up the “t word” tariffs. Maybe you thought you'd get away without talking about them. But we're just going to acknowledge them quickly. Som, do you want to talk a little bit about tariffs?

Som Priestley: Sure. Tariffs and trade policy definitely do grab headlines. But you know it's important to remember that they’re nothing new, and they've been part of the policy toolkit for decades. And so, in the short term, while tariffs can create volatility because they're often used as negotiating tools, and they can disrupt the status quo. Markets do tend to react a little too quickly and, you know, sometimes too extremely in the short term to these headlines.

So what's also sometimes overlooked is that the tariffs do not just impact the countries that are being targeted. They can also weigh on the companies at home, whether that's raising input costs or disrupting supply chains. So, you know, in short, I'd say while tariffs can certainly impact markets in the short term, they also tend to change more frequently than the fundamentals that drive long-term returns. And I would say the key is not to treat policy headlines as a reason to avoid international investing altogether.

Roger Young: I think that's a great point, Som. Don't use it as an excuse, essentially. And broadly, we often caution people in a number of ways don't overreact to policy headlines, whether it's that “t word” tariffs or something else. I know that can be hard to do, but we do try to hammer that home. It's not easy to predict even the short-term effect of certain policies like this on a company's results, let alone what that's going to do to their stock and let alone the longer-term effect.

So remember, and I'm going to sound like the financial planning person that I am here, your retirement timeline is potentially decades long. Policy cycles are a lot shorter. When we talk about tariffs, you know, last year in 2025, markets went up and down quite a bit on all the tariff news. Now already in 2026 the Supreme Court has nullified some of those U.S. tariffs.

So again it's a shorter policy cycle than what you should be worrying about, typically as an individual investing in different markets, especially for retirement.

Jessica Sclafani: Thanks, Roger. It's really helpful to keep in mind that the timeline for investing for retirement is generally a long one, depending on where you are in your savings journey. And that some of what we're talking about today can really be described as short-term noise.

Som Priestley: Yeah, that's right Jessica. There's a lot of headlines out there, whether it's geopolitics, macroeconomic policy, tariffs, and so on. A lot of these are very fluid situations. And so, a lot of noise can come from those headlines you know. So, at T. Rowe Price you know we really try to look through that noise. We use our global research platform to monitor the situations very closely.

We have Washington analysts and research analysts around the world. So we're really focused on what's going on to drive the returns for the companies and try to look through some of those other elements.

Jessica Sclafani: Thanks, Som. So we've talked a lot now about headline risk and how that might make individual investors more hesitant to allocate to international stocks. I think another potential risk that we might want to talk about relates to currency risk, which is something we have to think about with international investments. How should our listeners be thinking about currency risk associated with international investments,

understanding that we're not asking our investors to become currency traders by the end of this podcast, but Som, maybe you can help us think through currency risk?

Som Priestley: Sure. So when you invest internationally, you're exposed to sort of two factors. One is the company's performance and then the other is the currency movements or the changes in exchange rates. And so that's what most people mean by currency risk. So simply put, when currencies move, they can affect the value of your investment when it's translated back into U.S. dollars.

And that'll be on top of how the market or the company itself is doing. You know, those currency moves can really work in either direction. If a foreign currency is strengthening, it can add to the returns for U.S. investors. But on the flip side, if it's weakening, it can detract from those returns. That's why international investments can sometimes feel a little bit more volatile in the short run.

Not necessarily because the companies are riskier because the currencies are also moving around at the same time. But I would say so while currency risk is real, and something that we are cognizant of, is just one of many factors that can influence returns.

Roger Young: Som, I'm glad you mentioned that it can go either way. As an example, up until 2025, the U.S. dollar had been strengthening pretty consistently over a decent period of time. So as you say, that was something that at that point contributed to the underperformance of international stocks. But it doesn't always happen that way, it can be the flip side.

I know there are certainly a lot of people in the U.S. who have reasonable concerns about our deficits, debt, and inflation potentially devaluing the dollar, but that's really hard to predict. An example I remember I had a client probably about 12, 13 years ago, and he had a concern about the U.S. dollar. He wanted a currency investment essentially to bet against the U.S. dollar.

I told him what was available in terms of investments, but then I asked him, “what currencies do you think are going to do better than the U.S. dollar?” He didn't really have a great answer for that. So he gave it some more thought, and he didn't pursue the strategy. I think he's probably pretty happy now that he didn't pursue that strategy.

You know, all of that said, I'm not a currency expert, Jessica, I'm certainly not expecting to be a currency trader by the time we finish here and hopefully our audience doesn't feel that pressure and, you know, knows that it's OK to be a little confused about currencies if you have people helping you with the investments who do understand it like Som.

Jessica Sclafani: Right. And currency risk is maybe a component or a facet of international investing, but it's not a reason to not have a portion of your portfolio allocated to international stocks. So while we're talking about currency risk, I do want to just acknowledge that there are ways that portfolio managers, the professionals, like Som, can address currency risk. And this is really where that conversation around hedged versus unhedged comes in.

These might be terms that are familiar, or our listeners are somewhat familiar with. Som, can you help us understand what hedged versus unhedged means?

Som Priestley: Yes, sure. So if we were to hedge an investment, we would be trying to remove our exposure to that investment or its risk. But actually, one of the reasons we tend to leave our equity investments unhedged in currency exposure is that it tends to only be a modest percentage of the overall equity portfolio risk. And in fact, currency exposure can be diversifying because it gives your portfolio another source of return that doesn't always move in the same direction as U.S. stocks.

Also, you know, if I take this further, it can potentially help you seize on buying opportunities if something has fallen more than it should have. But again, this goes back to some of these behavioral challenges that we've spoken about, because you have to be willing to rebalance your portfolio often into an area that might be underperforming.

So, you know, you might say, “oh, I should rebalance. But U.S. stocks have done really well and maybe they can keep going.” So that's why we tend to prefer more of a or would recommend for some folks a systematic approach where you're automatically rebalancing your portfolio back to those goals that you have based upon how much they've deviated from sort of your long-term objectives.

Roger Young: That's great. I think it's probably also worth noting on hedging, it's not free to hedge, right? So that cost does play into your decisions.

Som Priestley: Exactly.

Jessica Sclafani: So, Som, could you give us an example of where you would implement hedging? You talked about equities and we tend to leave those unhedged. So where would we want to hedge currency risk.

Som Priestley: Yeah. So, we do tend to hedge currency exposure in fixed income. That's where it's a larger percentage of the overall bond portfolio's risk.

Jessica Sclafani: OK, helpful. Thanks, Som, for that. So maybe as a quick recap as to what we've discussed so far in our conversation today, we've defined international investing, we've talked through sizing that allocation in a broader portfolio, and then we've also talked about what it means to be hedged versus unhedged. Roger and Som, we've talked about how we generally like to see an allocation anywhere between 20% to 40% in international stocks.

For our listeners today that currently sit at zero or very small allocations to international stocks, how would they go about starting to build out that exposure?

Roger Young: Well, we already mentioned it's OK to start broadly and simply with one or two international mutual funds or exchange- traded funds. The other thing I'd mentioned is about the speed. It's OK to do it gradually. You certainly don't need to obsess about the timing of how you're making a switch into more international. If you're at zero or something really low, you do want to move at a reasonable pace, but you can do it somewhat gradually.

Not necessarily all at once. And that fits into what we've been talking about managing around, not overreacting to headlines, not making dramatic changes emotionally. I would say that this change from U.S. stocks to international is an important decision. It's not as big an emotional change as, say, someone who thinks, “oh, I should get out of stocks entirely because of the headlines.”

So going from U.S. to international doesn't have to have that same magnitude. But at the same time, if you want to take it somewhat slowly, that's fine too. Another thing I'll mention is if you're saving for retirement, especially, a target date solution is often a nice way to get that international exposure, and it will make automatic adjustments for you over time and rebalance for you.

Jessica Sclafani: Right, a target date solution could be an easy way to have an allocation or exposure to international stocks, and I'm willing to venture that many of our listeners today already have exposure to a target date fund in their 401(k) plan sponsored by their employer. Just in case people are scratching their head when we're saying target date solutions, these are dynamic solutions typically offered within workplace plans, like a 401(k), where you select a fund that is based on your expected retirement date.

So these funds typically have a year in their naming convention. And target date solutions, part of the beauty of them is that you have a professional portfolio manager who's making decisions for you in terms of your exposures, so it's kind of built-in diversification for you. Target date funds typically have an international allocation built into the fund.

The other beauty about target date funds. We've talked a bit about rebalancing, but the target date fund will do that for you, so you don't have to think about some of the rebalancing considerations and the long list of inherent biases that we all know we have, but find difficult to face, you don't have to think about that with the target date solution.

Roger Young: It's definitely nice to take some of those decisions off your plate, right? You can think about more fun things. That's good.

Jessica Sclafani: More fun than international investing, Nestlé chocolate chips, and Taiwan semiconductor chips? I don't know if that's possible.

Som Priestley: But yes, I mean, I think if we sort of look across our conversation as a few themes. You know, don't chase countries, don't chase trends, don't try to wait for the perfect entry point. You know, I think it's a lot easier to think about diversification, not market timing and staying consistent against your long-term investment objectives. You know, professionally managed solutions like target dates, professional portfolio managers like ourselves,

You know, we're spending our time evaluating these different factors for you. So we're thinking about both top-down or macroeconomic factors like the business cycle but then also bottom-up factors, so company fundamentals, valuations, and other technicals.

Jessica Sclafani: So Som, you did mention you're thinking about the macroeconomic backdrop and in our research what we consistently see is that inflation is a top concern for our retirement savers. They're really worried about the potential impact of inflation on their purchasing power and retirement. So, you know, how do you think about inflation when we're talking about an international allocation within a broader portfolio?

Som Priestley: Yeah. So inflation is definitely one of the macroeconomic factors that we pay attention to. As you're thinking globally inflation can be increasing or decreasing across the globe. And that will impact various countries’ interest rate policies which can then have implications for equity and fixed income markets. So, I think this really does highlight the importance of diversification beyond a single country and diversifying into multiple countries around the globe.

Roger Young: You know, from a personal finance perspective, for people who are worried about their own inflation on their costs as they go into retirement, we always highlight the importance of investing with some potential for growth. That means making sure that you have enough stock investments to potentially outpace inflation over time. And again, I think that highlights looking for opportunities wherever they may be.

And certainly that could be international stocks.

Jessica Sclafani: Great. So as we look to wrap up our discussion today, I'm going to ask each one of you a final question, which is, what are your biggest key takeaways for maintaining an international allocation over time? Som, let’s start with you.

Som Priestley: Yes, I'd say my strongest suggestion is to make staying balanced as automatic as possible. We talked about rebalancing earlier. So, whether it's built into your retirement plan or something that you review periodically, it really helps you avoid some of those emotional decisions and keeps your portfolio aligned with your long-term goals, even as markets change. It's also important to set the right expectations.

So in a well-diversified portfolio, we often say that you will probably be apologizing for something, which means that if we're doing our jobs correctly, there's going to be elements of the portfolio that are outperforming or underperforming, you know, potentially at the same time. In some ways you'd be more concerned if everything was moving in the same direction, right?

So you want to always sort of question that you're diversified enough, that you're taking advantage of the broader global opportunity set. Finally, I would say your focus should be kept on your long-term goals and trends rather than short-term headlines. The world is always evolving, and different regions will lead at different times. So, staying globally balanced, patient, and as disciplined as you can be just improves your chance of meeting your long-term objectives versus sort of consistently reacting to what's working, what's not been working in the more recent time.

Roger Young: Som, I really liked one of the things you mentioned there about that regret or kind of apologizing for the performance of a diversified portfolio. It's so easy for us to say, “wow, if only I had been completely invested in investment X or this sector or this part of the market,” we know deep down we shouldn't be disappointed and we know we shouldn't be in all one thing,

but that can be hard to remember sometimes when we see big numbers for a particular investment. I guess what I would add in terms of how to keep this going for yourself over time is just review your portfolio regularly. If you're doing it yourself, maybe do it annually, maybe a few times a year. On the flip side, don't be constantly looking at it.

I think you'll drive yourself crazy. And again, then you might be more prone to doing those things emotionally succumbing to those biases. So don't let those emotions lead you to a completely U.S. portfolio. We do see people who do that, unfortunately. But over the decades you have going into retirement and then through retirement, a well-diversified plan really helps you build confidence that you're on the right track, and you're managing your risk appropriately.

The last thing I'll mention is if you don't want to manage this yourself, if you want more of that, time to think about more fun things. If you worry that you're prone to behavioral biases, having a financial professional, an advisor, in your corner really can help you stay grounded. An advisor can provide perspective during those market swings and headlines that you see. They can help you stick with a plan and make sure that your portfolio does stay appropriately balanced.

Jessica Sclafani: I'm so glad you brought up the potential role and value of a financial advisor, and I just can't help myself but to remind our audience that this season we do have an episode that focuses on best practices for finding a financial advisor that's a good fit for you.

Roger Young: I love that episode. You have fun people on that episode.

Jessica Sclafani: I always have fun people, Roger.

Roger Young: Well, that's true.

Jessica Sclafani: True, so that's probably a perfect point for me to say. Som, Roger, thank you so much for joining me today. This has been a really rich discussion about why international investing still plays a vital role in portfolios, and how today's global landscape makes our favorite word—diversification—especially important. Again, I'm Jessica Sclafani, thanks so much for listening. Please tune in to our next episode for a conversation on how artificial intelligence is impacting financial security and staying safe in a digital world.

If you like this podcast, and I know you do, please rate us and subscribe wherever you get your podcasts. And remember, the numbers matter, but so does knowing you have the freedom to live with purpose and peace of mind.

T. Rowe Price Retire With Confidence®

This episode of CONFIDENT CONVERSATIONS® on Retirement is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice. This podcast does not provide recommendations concerning investments, investment strategies or account types. It is not individualized to the needs of any specific investor, and not intended to suggest any particular investment action is appropriate for you, nor is it intended to serve as the primary basis for investment decision making.

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