If someone wants to hold international funds, I'm all for it. I just wish they could articulate why they want to hold international funds, beyond "diversification" into something different.
So you consider the idea of diversifying from all your assets in one US bank into all US banks valid because you are spreading the risk, but somehow you think it doesn't make sense to spread it through to banks outside the US??
Why don't people articulate why they want to hold international funds, beyond "diversification"?
Because there is no need to find another reason. Diversification
IS the reason. If you diversify throughout all companies and sectors by using a total market index, then you are doing that for
diversification. Your question is no different from someone telling you to articulate why you want to hold total market funds, beyond "diversification" into something different.
There are hundreds of currencies in the world, do I need to hold them all? I would argue that diversifying into every currency is a stupid idea. Diversifying into every international stock market is probably a stupid idea too, for the exact same reasons.
Holding international funds is not for the sake of diversifying currency, that is largely a side effect. The purpose is to diversify into companies in other markets in the same way that you would invest in banks throughout the US rather than just in one city.
It seems your problem is specific to currency risk associated with international funds.
Currency risk is a real risk, and unlike market risk, it is not rewarded/compensated, and this is one valid argument against (unhedged) world-wide diversification. If currency risk is your problem, then state this as being the problem, rather than a blanket statement that investing internationally is "
probably a stupid idea". Investing internationally is not a stupid idea. Your inability to comprehend the separation of the two concepts is the problem.
As someone from a smaller country, I have no choice by to have to deal with the trade off between diversification of markets vs currency risk. This is a whole discussion with a host of upsides and downsides that need to be taken into account. Sure since your country makes up half the world index and has a very diverse industry within your country, you
can invest only in domestic equities and will probably be ok. Just because you
can doesn't mean some diversification, even with some currency risk, wouldn't improving the outcome further, or that it is
stupid.