Is it worth owning international stocks? There is far from universal agreement. The traditional argument for diversifying outside the U.S. is straightforward: diversification—since domestic and international stocks don’t move in lockstep, and sometimes diverge significantly.

At the same time, however, international stocks have lagged their domestic counterparts for so many years that it’s been trying the patience of even the most patient investors. Domestic stocks have outpaced international stocks in eight of the past ten years. On average, over that period, the U.S. market has returned 12.3% per year. The most commonly referenced index of international stocks, on the other hand, has delivered just 4.6% per year. On a cumulative basis, domestic stocks have more than tripled, gaining a cumulative 219%, while international stocks have gained just 57%.

That’s enough to make any reasonable person question the value of investing outside the U.S. Though the long-term data do indicate a benefit in diversifying, we need to be cautious in using the past as a guide to the future. The economist John Maynard Keynes commented that, “In the long run, we are all dead.”

So why, in the face of recent data, would anyone stick with international stocks? Below are five reasons why I do still recommend international holdings.

Performance. Despite Keynes’s quip about the long run, the reality is that you don’t have to go back too far to find periods when international stocks were doing quite well. Most notably, in the years after the dot-com market crash in 2000, international stocks held up much better. If you had been in retirement at the time and relying on your portfolio for monthly withdrawals, that would have been a great benefit.

One challenge in assessing international stocks—which contributes to the debate around them—is that historical data on markets outside the U.S. is limited. Reliable figures on U.S. shares go back to 1926. But data on international markets goes back, in most cases, no more than 50 years. But in the data we have, there’s a clear pattern of domestic and international stocks regularly trading places in their performance. On a chart, their relative performance looks a bit like a sine wave, oscillating back and forth. International stocks saw periods of outperformance in the mid-1970s, the mid-80s and the mid-90s.

Valuation. While valuation metrics such as price-to-earnings (P/E) ratios aren’t entirely predictive of future returns, there is something of a relationship. When markets are expensive, future returns tend to be lower. Owing to years of relative underperformance, that’s now an argument in favor of international markets. The P/E of the S&P 500 today is 21, while the comparable figure for the EAFE (Europe, Australasia and Far East) index of developed international markets stands at just 14. Emerging Markets are even cheaper, at 12. Some are quick to point out that domestic stocks deserve higher valuations—owing to the preponderance of fast-growing technology companies here. I agree with that. But nonetheless, the valuation gap between domestic and international stocks has grown. Thus, international markets, on a relative basis, are historically cheap. That may present an opportunity.

Exposure to value. What’s been driving the U.S. market up in recent years? For the most part, it’s the handful of technology stocks now known as the Magnificent Seven: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. Together with one more—Broadcom—technology stocks hold eight of the top 10 slots in the S&P 500, accounting for more than 30% of the total value of the index. By contrast, what are the largest companies outside the U.S.? Only half are technology companies. The other five of the top 10 international stocks include four pharmaceutical companies and a food manufacturer.

Through one lens, you might view this as a strength of the U.S. market and a point of weakness for markets outside the U.S. But as I noted a few weeks back, growth stocks like the Magnificent Seven don’t always outperform. Value stocks, on the other hand, are distinctly less exciting, but they’ve demonstrated stronger performance than their staid appearance might lead investors to believe. And since value stocks like food and pharmaceutical companies dominate international markets, that gives international stocks a value tilt. For that reason, adding international stocks to a portfolio can help better balance the mix between growth and value. To be sure, growth stocks like the Magnificent Seven have delivered impressive performance in recent years, but as the standard investment disclaimer goes, past performance does not guarantee future results.

Defense. As I noted earlier, the top stocks in the S&P 500 account for a disproportionate share of the overall index. The top 10 total more than 35%. While these stocks are doing well, that’s a benefit. But should one of them run into trouble, the top-heavy nature of the U.S. market presents a risk. In contrast, when you invest outside the U.S., concentration is less of a concern. That’s for two reasons. First, most international markets don’t have any companies on the same enormous scale as the largest firms in the U.S. And second, because most international indexes contain stocks from multiple markets, that helps to limit the weighting of any one company. In a total international markets fund, for example, the top 10 stocks account for just 10% of the total.

Currency diversification. International stocks can help diversify a portfolio along another dimension: currency. I wouldn’t recommend buying currencies as a standalone investment, because of their volatility and lack of intrinsic value. But as an added benefit of owning international stocks, currency diversification can provide an additional, potentially helpful source of diversification.

If you want to include international stocks, what’s the right percentage? As I often do, I recommend a “center lane” type of approach. Today, international markets account for about 40% of the total value of world markets. But there’s no rule that says your portfolio must also hold 40%. Personally, I recommend 20%. Why? For starters, if you live in the U.S. and your bills are in dollars, then that’s a good reason to hold most of your investments in dollars.

Indeed, there are reasons you might tilt your portfolio toward the U.S. market even if you live outside the U.S. Jack Bogle, the late founder of the Vanguard Group, held 100% of his personal portfolio in domestic stocks. Among the reasons he cited: The U.S. has “the most innovative economy, the most productive economy, the most technologically advanced economy and the most diverse economy.” It’s an important point. While other countries have produced successful companies, the U.S. is unique in the number and size of the companies it’s produced. For that reason, I wouldn’t hesitate to hold the lion’s share of your portfolio in domestic stocks—but there are also good reasons to look beyond our borders.