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For most Americans, investing for retirement in 2026 remains a long-term practice unfolding over many decades. It requires looking beyond the daily ups and downs of the stock market, remaining disciplined amid economic volatility and adopting a long-term focus – and possibly one that looks beyond U.S. borders.
While U.S. equities have historically outperformed international large-cap stocks, that has largely shifted in 2026. Non-U.S. stocks have provided 18.2% returns compared to just 5.6% for U.S. stocks. It represents a notable shift in the market, with a recent Charles Schwab survey showing a 21% increase in international holdings among surveyed traders. It begs the question: does your retirement portfolio need more international exposure? This is what to consider.
A financial advisor can help build a portfolio that aligns with your long-term goals and then manage it for you.
Why Schwab Favors International Stocks
If international large-cap stocks continue to outperform their U.S. counterparts, it will mark a departure from an established trend.
For the last 15 years, domestic equities have returned 13.5% annually compared to 4.8% for international stocks. Despite this track record of underperformance compared to similar U.S. stocks, international large-caps have reported a stronger return outlook in 2026.
“U.S. investors are naturally biased toward domestic stocks and bonds, and that’s especially true when U.S. markets are dominating,” explains Michelle Gibley, CFA®, Director of International Research at the Schwab Center for Financial Research. “However, most investors should have at least some international exposure, and with so much domestic uncertainty, that’s especially true today.”
Over the next decade, Schwab Asset Management projects returns for international equity asset classes to exceed those for U.S. large- and small-cap stocks. Therefore, experts recommend a minimum 5% allocation to international stocks, with international stocks accounting for as much as 40% of overall stock portfolios, depending on investor risk tolerance.
Gibley explains, “The lion’s share of that allocation should go to developed markets, but some exposure to emerging markets, which have higher growth potential but also higher risks, may be warranted for those with a longer-term investing horizon.”
What Are International Large-Cap Stocks?
International large-cap stocks are shares of established, publicly traded companies based outside the United States with large market capitalizations of over $10 billion.
These companies are typically leaders in their industries and operate across multiple countries, often generating revenue from global consumer and business markets. Examples include multinational firms in sectors such as healthcare, consumer goods, energy, financial services and industrial manufacturing.
In retirement portfolios, international large-cap stocks often serve as a core form of global equity exposure. They tend to be less volatile than international small-cap stocks while still providing diversification benefits relative to U.S. equities. Because their performance is influenced by foreign economic growth, currency movements and regional policy decisions, they can behave differently from domestic large-cap stocks.
International large-caps are commonly accessed through mutual funds or exchange-traded funds (ETFs) that track broad international indexes. These funds typically hold hundreds or thousands of companies across developed markets and, in some cases, emerging markets. This structure allows investors to gain diversified exposure without selecting individual foreign stocks.
Including international large-cap stocks can reduce reliance on U.S. market performance alone. When domestic valuations are high or U.S. growth slows, international markets may offer comparatively attractive opportunities.
Over long retirement time horizons, this diversification can help smooth returns and reduce concentration risk.
How Much International Exposure Should You Add to Your Retirement Portfolio?
International stocks are typically used as a complement to U.S. equities rather than a substitute.
Many diversified retirement portfolios allocate a portion of total stock exposure to international markets to spread risk across different economies, currencies and business cycles. This approach reduces reliance on any single country’s performance.
A common approach is to view international holdings as a percentage of the portfolio’s equity, rather than encompassing the entire portfolio. For example, an investor portfolio that is 70% stocks and 30% bonds may allocate 25% to 40% of the stock portion to international equities, with the remainder in U.S. stocks. This keeps growth potential diversified while preserving a core domestic allocation.
Age and time horizon influence how much international exposure makes sense. Investors earlier in their careers often hold higher stock allocations overall and can accommodate greater exposure to international equities. Those closer to retirement may still hold international stocks, but typically at lower levels, reflecting a more conservative overall allocation.
Risk tolerance also plays a role. International stocks can experience larger short-term swings than U.S. large-cap stocks, particularly during global economic stress. Investors comfortable with volatility may hold a higher international allocation, while those who prioritize stability may prefer to keep exposure closer to the lower end of typical ranges.
A general example illustrates how this can work. Suppose a retirement portfolio totals $500,000 and is structured as 70% stocks and 30% bonds. The stock portion equals $350,000. If 30% of that stock allocation is directed to international equities, $105,000 would be invested internationally, with the remaining $245,000 in U.S. stocks. This maintains global diversification without dominating the portfolio.
International exposure also benefits from periodic rebalancing. As U.S. and international markets perform differently over time, allocations drift away from targets. Rebalancing restores intended percentages and reinforces a disciplined approach to diversification.
Bottom Line
Despite a significant history of underperforming compared to U.S. stocks, international large-cap equities have recently emerged as outperformers, with experts optimistic for the future based on valuation and return expectations. While the projections cannot foretell future global and economic events, they are based on long-term fundamentals and not meant to guide a short-term tactical investment strategy.
Tips for Retirement Savers
- A financial advisor can be a valuable partner when it comes to saving and planning for retirement, and creating a comprehensive financial plan. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- While employer-sponsored retirement plans are powerful tools for building a nest egg, don’t overlook the viability of a health savings account (HSA). Contributions are tax deductible, grow tax free and aren’t taxed when used for qualified medical expenses. Additionally, the money remains in your account forever and can be carried into retirement.
- Knowing where you stand it comes to your savings goals is an important part of retirement planning. SmartAsset’s retirement calculator can help you estimate how much money you’ll have saved by the time you’re ready to retire.
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