Don’t Just Focus on TSMC: Why You Should Include US and Japanese Stocks in Your Portfolio

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Is your portfolio overly concentrated? Global stock market capitalization exceeds $135 trillion, while Taiwanese stocks account for less than 2%.

Placing all your capital in a single market means you may miss broader opportunities. The US economy represents over 26% of global GDP and is the locomotive of the world economy. Looking at international markets, Japan’s stock market ranks third globally by market cap. Including US stocks and Japanese stocks in your portfolio is a crucial step toward risk diversification and participation in the growth of global leaders.

Key Takeaways

• Investing should not be limited to Taiwanese stocks; include US and Japanese stocks to diversify risk and participate in global markets.
• The US market is large and highly diversified — the core of any portfolio, allowing you to ride the growth of global giants.
• Japan’s market is undergoing reforms with corporate value re-rating and yen depreciation, creating new opportunities for investors.
• Think of Taiwanese stocks as the “specialized shooter,” US stocks as the “all-round captain,” and Japanese stocks as the “high-potential rookie” to form a balanced investment team.
• Index ETFs make global diversification easy — even small investors can start internationalizing their portfolios.

Why US Stocks Should Be the Core of Your Portfolio

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When your portfolio stays only in Taiwanese stocks, you miss out on the massive market that accounts for over 50% of global equity capitalization. Adding US stocks is not just about risk diversification — it’s the key to upgrading from a regional to a global investor. The US market is the top choice for many when building an international portfolio, thanks to its irreplaceable advantages.

Advantage 1: Market Size and Industry Diversity

Compared to Taiwan’s heavy concentration in electronics and semiconductors, the US market offers a complete industry spectrum. You can invest not only in tech but also in consumer staples (e.g., Coca-Cola), healthcare (e.g., Johnson & Johnson), and financial services (e.g., JPMorgan Chase). When a single sector faces headwinds, other sectors can support your overall assets — far more stable than a single-market portfolio. Investing in US stocks means directly participating in the growth of global leaders like Apple (Apple) and NVIDIA (NVIDIA).

Advantage 2: Trading Flexibility and Mature Shareholder Returns

US companies place great emphasis on shareholder returns, commonly through dividends and stock buybacks. A mature regulatory framework makes these actions more flexible and efficient.

The US SEC’s Rule 10b-18 implemented in 1982, combined with mid-1990s market reforms, significantly reduced the cost and restrictions of share repurchases, making them a common tool for returning value to shareholders.

This allows companies to flexibly deploy capital, buying back shares when prices are undervalued, thereby increasing per-share value for shareholders.

Risk Considerations: Currency Fluctuations and Dividend Tax

Investing in US stocks also involves risks. First is currency fluctuation — your investment is denominated in USD. When the TWD appreciates, your converted funds may shrink.

Second is the dividend tax. Currently, US dividends received by Taiwanese investors are subject to a 30% withholding tax. Although US Congress has proposed legislation to potentially lower this rate, it remains a cost to consider. Despite these risks, long-term holding and proper asset allocation can effectively manage these challenges while enjoying the returns from this massive international market.

Looking Beyond: Japan’s Turning Point and Potential

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When Warren Buffett heavily increased his holdings in Japanese trading houses, global investors once again turned their attention to this long-dormant market. Japan, the world’s third-largest stock market by capitalization, is experiencing a pivotal turning point to escape its “lost thirty years.” Aggressive reforms by the Tokyo Stock Exchange, combined with a unique monetary environment, bring undeniable potential to your portfolio.

Advantage 1: Corporate Value Re-rating Driven by Policy Dividends

In the past, many Japanese companies traded at a price-to-book ratio (P/B) below 1 for extended periods, meaning their market price was lower than book value. To address this, the Tokyo Stock Exchange (TSE) launched major reforms in 2023.

“In particular, companies with P/B ratios persistently below 1x are required to disclose improvement policies and concrete measures.”

This naming-and-shaming requirement forces companies to present concrete plans to become “conscious of cost of capital and stock price,” actively enhancing shareholder returns. This policy-driven reform wave is driving corporate value re-rating, creating an excellent entry point for investors.

Advantage 2: Investment Opportunities Created by Monetary Policy

In March 2024, the Bank of Japan (BOJ) officially ended negative interest rates, yet the yen remains relatively weak. This is a significant boon for Japan’s export-oriented companies. When firms like Toyota and Sony convert overseas USD earnings back to yen, a weaker currency boosts reported revenue and profits.

• Toyota Motor: Recorded record global sales revenue of $294 billion for the fiscal year ended March 2024.
• Corporate Profits: Benefiting from yen depreciation, overall Japanese corporate profits have reached the highest level since 1954.

For you, investing in these export leaders means not only participating in their core business growth but also enjoying an additional tailwind from currency.

Risk Considerations: Sustainability of Economic Transformation and Currency Impact

Of course, investing in Japanese stocks carries risks. First is whether Japan’s economic transformation can be sustained. Rapid interest rate hikes in the future could impact companies accustomed to low rates and increase the government’s debt burden. Second, while a weak yen is currently a positive, currency fluctuation is a double-edged sword. A future yen appreciation would erode exporters’ profits. When allocating to this promising international market, remain mindful of these potential political and economic changes.

The Golden Trio: Strategic Allocation of Taiwan, US, and Japan Stocks

After understanding the stability of US stocks and the potential of Japanese stocks, you may ask: “How do I integrate these three markets?” This is not about abandoning familiar Taiwanese stocks but learning to build a stronger investment team.

Think of the three markets as a basketball team:

• Taiwanese stocks = “Specialized shooter”: World-class strength in specific areas (semiconductors), delivering explosive scoring.
• US stocks = “All-round captain”: Strong offense and defense, experienced — the stabilizing core of the team.
• Japanese stocks = “High-potential rookie”: Full of breakout power, capable of delivering unexpected excess returns at key moments.

A balanced team can go further in the ever-changing game.

Repositioning Taiwanese Stocks: Familiar and Focused Regional Strength

Many Taiwanese investors start with the local market — that familiarity is your advantage but should not be a limitation. You need to redefine Taiwan’s role in your global portfolio: a “regional specialist” focused on tech strengths.

Taiwan’s semiconductor industry is astonishing, accounting for about 20% of global production. In foundry alone, Taiwan commands over half the global market. The market cap of leader TSMC alone represents more than half of the MSCI Taiwan Index — a concentration you must acknowledge.

This means investing in Taiwanese stocks is largely a bet on the future of the tech sector.

Fortunately, Taiwan’s growth momentum extends beyond semiconductors. Under the global AI trend, Taiwan’s tech supply chain will continue to benefit. You can also find other promising areas in the local market:

• Biotech industry: Supported by government policy, Taiwan’s biotech R&D and innovation patents are growing rapidly.
• Pharmaceuticals and medical devices: Taiwan aims to become a global biomedical R&D hub, with industry clusters already forming in multiple cities.
• Telecom services: 5G rollout and IoT applications open new possibilities for the sector.

Thus, treat your Taiwan allocation as an “offensive position” to capture global tech trends and participate in emerging local industries.

Core-Satellite Strategy: US Stocks as Core, Japanese & Taiwanese Stocks as Satellites

To build a robust global portfolio, adopt the classic “core-satellite” approach. This strategy balances stability and growth.

• Core allocation: Typically 70–90% of the portfolio — your asset stabilizer. It should consist of stable, diversified foundational assets aimed at capturing long-term steady market returns.
• Satellite allocation: 10–30% — your asset accelerator. Consists of smaller, more agile investments targeting excess returns from specific markets or sectors.

Within this framework, your allocation becomes clear:

1. US stocks as “core”: The massive and diversified US market spans tech, finance, consumer, healthcare, etc. Investing in broad-market US index ETFs gives you a low-cost, highly stable portfolio foundation.
2. Japanese and Taiwanese stocks as “satellites”:
   • Japanese stocks: Opportunity-type satellite to capture policy dividends and currency tailwinds.
   • Taiwanese stocks: Your most familiar tech-themed satellite, focused on semiconductor and AI supply chain growth.

This setup provides a solid backbone (US stocks) while flexibly participating in regional growth stories through Japan and Taiwan.

Leverage Index ETFs: One-Click Global Diversification

For investors just starting with international markets, researching individual companies can be time-consuming. Index ETFs are your best entry tool. They allow you to own hundreds or thousands of companies with the simplicity of buying one stock, dramatically reducing single-company risk.

You can invest in these global index ETFs via Taiwan brokers’ “complex order” service or by opening an overseas brokerage account.

Tip: Expense ratio is a key consideration when choosing ETFs — the lower the fee, the more you actually keep.

Here are some popular ETF examples to start building your core and satellite allocations:

By strategically allocating these ETFs, you not only diversify across countries but expand your investment horizon from a single island to the entire world, building a safer, higher-growth future for your wealth.

Over-reliance on a single market exposes you to unpredictable risks like geopolitical events. This “home bias” causes you to miss the steady returns of global markets. Including US stocks (stable core) and Japanese stocks (high-potential satellite) is the key step from regional to global investor, delivering more reliable long-term results.

Stop staring only at TSMC’s price! Start researching a US or Japanese index ETF today — take the first step toward global asset allocation and build a wider moat for your wealth.

FAQ

I don’t have much capital — can I still invest in US or Japanese stocks?

Absolutely. The US market allows fractional shares, so you can buy a portion of expensive stocks with small amounts. You can also purchase affordable index ETFs to own a basket of companies with little money and easily start global investing.

How do I start buying and selling US and Japanese stocks?

You can begin through two main channels:

• Domestic broker complex orders: Use your existing Taiwan stock account — most convenient.
• Open an overseas brokerage account: Usually lower trading costs and more product choices.

Choose based on your needs and trading frequency.

What about currency risk in overseas markets?

Currency fluctuation is normal. You can smooth short-term impact through long-term holding. Using dollar-cost averaging (regular fixed investments) helps you buy at an average cost and reduces the risk of converting at a peak.

Is the 30% US dividend tax too high to make it worthwhile?

Note that this tax applies only to “dividends” — capital gains from buying and selling stocks are not taxed.

For growth-focused strategies, the actual impact of dividend tax may be smaller than you think.