Most investors don’t sock their money away for 45 years at a time, of course. So I looked at 15-year periods (there were 33 of them) and found that international small-cap blend stocks were a great addition to the S&P 500.
On average, the 15-year compound returns were 14.8% for international small-cap blend stocks, versus 11.8% for the S&P, and 13.6% for a combination of these two asset classes, with annual rebalancing.
The risk of this combination, I should add, was lower (measured by standard deviation) than that of either U.S. or international small-cap blend stocks by themselves.
The evidence is clear: International small-cap blend stocks have been an excellent way to diversify beyond the S&P 500 Index.
Next up: international small-cap value stocks, an asset class with a similarly impressive track record since 1982.