Stock asset allocation for non-US investors

 looks at how you might decide on your allocation to stocks. When deciding on your stock allocation, you face a number of questions:
 * What regional allocation will you use?
 * Do you want global diversification?
 * Do you overweight any regions? If yes, which ones?
 * Do you overweight your region and introduce a home country bias?
 * You also need to decide if you will focus on the mainstream Boglehead practices, or if you prefer one of the variations.
 * Do you introduce a tilt? If yes, to what?
 * Do you overweight or underweight a portion of the stock market? If yes, which one?

Worldwide market cap or overweighting a region or country
One of the Boglehead principles is to diversify. This means that instead of trying to pick the specific stocks or parts of the market that will outperform in the future, you buy funds that are widely diversified, or which approximate the whole market.

Owning the whole worldwide stock market
Owning the whole worldwide stock market would give you the maximum diversification. You would own large cap, mid cap and small cap stocks from developed and emerging markets, covering about 98% of the worldwide stock market.

Sometimes though, you have to accept a simpler portfolio. Perhaps where owning the whole worldwide stock market requires a complex and expensive portfolio of multiple funds. Options include:
 * A focus on only large cap and mid cap stocks of the developed markets. This covers around 75-80% of the worldwide stock market.
 * A focus on large cap and mid cap stocks from developed and emerging markets. This covers about 85%-90% of the worldwide stock market, and you can achieve it with one or two funds.

Home country bias
Home country bias means overweighting your home country or region in your asset allocation. One simple reason for this is familiarity. Another is that in some countries it may be difficult or even impossible to invest elsewhere.

See: Home country bias from finiki, and Equity home bias puzzle from Wikipedia. An article in A Wealth of Common Sense discusses how the different regions of the world differ in terms of their market structure and composition, and how home country bias can impact the diversification, performance and risks of your portfolio.

Overweighting the US market
Many US based Bogleheads overweight the US stock market. Both John Bogle in Common Sense on Mutual Funds and Taylor Larimore in The Bogleheads' Guide to the Three-Fund Portfolio argue for overweighting US stocks in a US investor's asset allocation policy by limiting non-US stocks to a maximum 20% of the total equity allocation.

This might also be a strategy for you, but only if you agree with their reasoning.

Global diversification on the finiki sister site
From finiki:

Investing in the World blog series
Forum member Siamond posted an Investing in the World series on the Bogleheads blog which poses the question:

Part 1 studies a fairly extreme position of investing 100% in the world (global stocks and global bonds).

Part 2 explores the opposite position of exclusively investing with domestic assets. The article focuses on the historical returns from 16 developed countries, looking from the perspective of a local investor, and assuming a strong home country bias to begin with (that is, solely using domestic stocks and domestic bonds).

Part 3 seeks a middle ground and looks at more diversified portfolios mixing domestic and global investments in the various countries of the study. It looks at the mitigation mixing domestic and global can bring to the countries having fared the worst, but also consequences for countries having fared better.

The author believes that this study makes a convincing case to seek a fairly high exposure to global (or international) equities, while keeping a significant tilt towards domestic equities.

Vanguard studies
Vanguard has several studies related to strategic asset allocation and home bias.

In The global case for strategic asset allocation and an examination of home bias, the study concludes:

In The role of home bias in global asset allocation decisions, the paper asks the question:

In Global equity investing: The benefits of diversification and sizing your allocation, the study concludes:

Variations on Boglehead investing
Along with the mainstream Boglehead stock allocation you can find some variations on Bogleheads investing discussed on the forum. Several studies investigate the benefits and drawbacks of these variations for US investors. It is not clear whether their conclusions would apply to non-US investors.
 * Adding and overweighting of REITs. US-based portfolios that provide allocations to REITs include David Swensen's Lazy Portfolio and Rick Ferri's Core Four Portfolio.
 * Adding more asset classes to a portfolio. For example gold, commodities, and various sub-asset classes of bonds. The most discussed portfolios using gold in portfolio construction include the Harry Browne Permanent Portfolio and the Golden Butterfly Portfolio.
 * Tilt to value and small cap. One much discussed portfolio that tilts to value and small cap stocks is Bill Schultheis's Coffeehouse Portfolio.
 * Slicing and dicing the market and overweighting some of the slices. Slice and dice portfolios include William Bernstein's "Coward's" portfolio and Frank Armstrong's "Ideal Index" portfolio.