1. Global Singularity - When it comes to investing, sales and margins are two main factors to consider, with location being tertiary. A fundamental investor should focus on returns delivered to shareholders, irrespective of country location. International trade accounts for more than half of the S&P 500's revenues and is up from over a decade ago. Investors need to focus on how they can achieve a healthy return while maintaining a competitive edge.
2. Industry Groups instead of Country Groups - Economists have spent a lot of time naming emerging markets and categorizing countries based on growth potential. Turns out it would be more advantageous to invest in a growing sector as opposed to a growing economy. The sector in which a company operates can be much more important than its location. Think about the market risk one is taking when investing in large and mid cap stocks in other regions. Diversification can enhance returns and minimize when choosing specific global sectors.
3. Global Diversification - Investing across multiple countries and sectors can result in a higher safety of principal. The primary goal of investing should be to minimize losses when you are focusing on performance. In exchange, global markets do offer a variety of risks to consider from currency exposures, geopolitical events and tax implications when investing overseas. Over the long run, these risks can be offset by increasing diversification in growing sectors across the world.
Even with a U.S. based stock portfolio, investors are already indirectly exposed to a large amount of global market risk. Globalization is here to stay and the smart investor needs to begin focusing on opportunities overseas. Investors will have to continue looking for more opportunities overseas as cross border business becomes seamless.
Lacking direct international exposure may mean you could miss out on global macro themes. By keeping an eye on sector growth from regions such as Europe and Asia, individual investors can stay ahead of domestic based companies. It is time to capitalize on these new developments as opportunities continue growing overseas.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.
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