Is US Tech Investing Too Risky? The Case for Global Diversification

The Invincible Market Trap

I had a conversation recently that stuck with me. A friend asked a simple question. He asked why anyone would own stocks outside of US Tech.

It feels like a fair question. The US market has been the undisputed champion for over a decade. It feels invincible and like the only game in town.

But this sentiment carries risk. It mirrors the mood in Japan during the 1980s. Back then Japanese companies dominated the global landscape. Investors poured money in because it felt safe. Then came a thirty year period of stagnation.

I also asked this person if they knew how much international stocks were up this year. They didn’t. As of this writing (12/19/25):

• The Vanguard International Developed Markets Stocks ETF (Ticker VEA) is up 30% YTD

• The Vanguard Emerging Markets Stocks ETF (Ticker VWO) is up 21%

• The S&P 500 is up 17% YTD

Point being, paying premium prices for US stocks (based on measures like P/E ratio) does not leave you with much margin for error. And it seems that maybe investors are starting to notice.

At the end of the day, when you buy a stock, you’re buying a claim to future profits from that company. And if you can buy a dollar of profits from one company for less than the other, you need to think long and hard about the price you’re paying.

Why should I buy international stocks when US tech is winning?

The goal is to buy them before they start winning. Not after. US dominance is a cycle. It is not a permanent state. Current valuations suggest the US market is priced for perfection, while the rest of the world trades at lower multiples.

Look at the price tag. US stocks are trading near record highs relative to their earnings (i.e., P/E ratio). You are paying about 23 dollars for every 1 dollar of future earnings. International markets are trading at about 14 dollars for that same dollar of earnings. You are looking at valuations that are roughly 40 percent lower by looking abroad.

We have seen this movie before. The US had a lost decade from 2000 to 2009. Emerging markets soared during that same period. Winners rotate. Chasing yesterday's winner often means missing tomorrow's opportunity.

Doesn't the US have the best economy?

A strong economy does not necessarily equal strong stock returns. GDP growth and stock market returns can have a negative correlation.

Look at the 70s and 80s. Japanese stocks outperformed the US by roughly 10 percent annually. Then the cycle flipped. In the 2000s, the BRIC nations (Brazil, Russia, India, and China) dominated while the S&P 500 went nowhere. History shows us that capital flows to where it is treated best. Betting on one region forever brings significant concentration risk.

Is my portfolio diversified if I own the S&P 500?

Not really. The S&P 500 has become highly concentrated in technology growth stocks.

If you work in tech, you already have exposure to those stocks. Your income depends on tech. Your bonuses depend on tech. Your RSUs depend on tech. If you invest all of your savings into an S&P 500 fund, you are doubling down on that same exposure.

You are creating a single point of failure for your financial life. If the tech sector takes a hit, your paycheck and your portfolio could drop at the same time. A blended portfolio seeks to smooth out the ride. It attempts to manage the inevitable periods when US stocks lag.

The chart above proves that winners rotate. A blended portfolio shown by the Yellow Line smooths out the ride.

(Please note that diversification does not ensure a profit or protect against loss in a declining market)

FAQ

Is international investing riskier than US investing?

Individually yes. Currency fluctuations and geopolitical issues add risk. But inside a portfolio, it generally lowers your overall risk. It diversifies the sources of your returns so you are not dependent on one economy.

How much international exposure should I have?

Global market capitalization is roughly 60 percent US and 40 percent international. Many diversified models suggest holding 20 to 40 percent international to capture the diversification benefit without taking on excessive currency risk.

Why not just buy US companies that do business internationally?

Because those companies still mostly move in lockstep with the US market. They share the same currency risks and regulatory environment. You do not get the full benefit of different economic cycles or true currency diversification.

Your Next Steps

1. Check your look through allocation. Log into your brokerage account and find the exposure tab. If your US stocks exposure is above 80 percent, you likely have a significant home bias that needs addressing.

2. Audit your RSU overlap. If you work for a major US tech company, realize that your S&P 500 index fund is likely doubling down on your employer. Consider using new money contributions to 401k or brokerage accounts to overweight International funds to balance this out.

3. Automate global exposure. Instead of guessing which region will win next year, consider holding a Total World Stock Market fund for a portion of your portfolio. This automatically captures global winners without you needing to predict them.

Meme of the Week

The Price of Perfection

The US market has seemingly priced in a perfect future. But paying a premium for past performance introduces valuation risk.

Diversifying globally is not about betting against the US. It is about acknowledging that the future is uncertain. It is about managing concentration risk rather than chasing yesterday’s returns.

Not sure if your portfolio is too dependent on Big Tech? Reach out and let us review your exposure together.

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Marcel Miu, CFA and CFP® is the Founder and Lead Wealth Planner at Simplify Wealth Planning. Simplify Wealth Planning is dedicated to helping tech professionals master their money and achieve their financial goals.

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