Riding the Highs: Investing in International Stocks at Peak Performance

Investing in international stocks at their all-time highs? It sounds risky, but it's a strategy with surprising merits. Forget the old mantra of "buy low, sell high." This approach embraces momentum investing, betting on stocks that show no sign of slowing down. Here's why it might just be a winning tactic:

Momentum is King: Stocks at their peak often signal a strong trend, backed by solid fundamentals or positive market sentiment. This momentum can drive further gains, making these stocks attractive for savvy investors.

Market Love: When a stock hits a record high, it grabs the attention of both retail and institutional investors, riding a wave of confidence and market recognition.

The Numbers Game: Our backtest, using the Vanguard Total Intl Stock Index Inv (VGTSX), showed that while the Compound Annual Growth Rate (CAGR) was slightly lower than a traditional buy-and-hold strategy (3.35% vs. 4.59%), the risk-adjusted return was significantly higher, and the maximum drawdown was less than half.

Historical Proof: Extending the backtest to 1926, we found even more robust results. The strategy showed similar returns to the buy-and-hold approach but with much lower volatility and maximum drawdown.

The Bottom Line: While buying at all-time highs goes against traditional wisdom, it offers a lower-risk, momentum-based strategy for international stocks. But, as always, do your due diligence and align it with your risk tolerance.

Original Article

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