The S&P 500 is up 17% year to date to new all-time highs. But U.S. investors who focus only on domestic stocks are missing out on enhanced performance and diversification over the long term.

“We do see investors have a home country bias,” Jim Ross, senior managing director and global head of ETFs for State Street Global Adivsor’s SPDR ETFs, said on a recent Charles Schwab conference call.

Investors have been too focused on U.S. stocks because they have been doing so well, at least for now – U.S. markets are up 17% year-to-date, compared to the 7% of other developed markets and the relatively flat performance in the emerging markets.

  • SPDR S&P 500 ETF (NYSEArca: SPY): up 16.6% year-to-date
  • Vanguard MSCI EAFE ETF (NYSEArca: VEA): up 10.3% year-to-date
  • iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM): down 2.5% year-to-date.

Nevertheless, Ross suggests investors should “diversify away from your home” with international holdings, which help smooth out long-term portfolio performance.

Additionally, he explains that there are different products now available that will provide varying market exposure. For instance, in international bond ETFs, investors can take sovereign or corporate debt exposure.

Also on the call, Michelle Gibley, Director of International Research at the Schwab Center for Financial Research, noted that while economic growth and stock returns are correlated, it does not mean that both go hand in hand.

“Some believe that economic growth equates to high stock returns,” Gibley said. “High economic growth can generate higher revenue but that is not always the case.”

Moreover, Gibley warns of the “misconceived view of economic make up of countries, but stocks don’t reflect that position.”