21st Century Investing Requires Global Strategy
Today’s portfolio management requires 21st century approach. Twenty years ago, the bulk of investment available to individual investors consisted of U.S. stocks and bonds. Now, however, we have access to a wide range of securities sold throughout the world. Several changes have caused this explosion of investment opportunities. The growth and development of numerous foreign financial markets, such as of those in Japan, the U.K, and Germany, as well as in the emerging markets, such as China, have made these markets accessible and viable for investors around the world.
In our opinion, a diversified portfolio must include stocks and bonds from foreign markets. Ignoring foreign markets could reduce your choices to less than 50 percent of available opportunities. In fact, studies have consistently shown those with a well balance portfolio with 50 percent or more invested in foreign markets have done far better than those with only U.S. securities. For example, during the mid 1990s, the U.S. market was doing well whereas the Japanese economy was in a recession. When the U.S. market went into recession after the dotcom bust, the Japanese market was starting to emerge from its recession. The point here is, this different market behavior helps spread the risk, thus reducing the overall portfolio risk. Long term result is a portfolio with foreign investment stands a better chance of coming out ahead.
Investing in foreign market (FOREX) today is easier than before. Aside from International bond investing such as Eurobond and Yankee bonds, investors can directly purchase share of foreign companies through foreign stock exchanges such as one listed on the London Stock Exchange (LSE) where the shares would be denominated in pounds and the transfer would be swift. Another alternative is to purchase the foreign share that’s listed on the NYSE or AMEX. This is similar to buying U.S. stocks, but only limited numbers of foreign firms qualify for-and are willing to accept-the cost of listing. It’s important to note the U.S. has the most stringent qualification before securities can be listed.
Companies such as Softbank Corp (U.S.A) and Sony Corp (SNE) are prime examples of foreign companies that are readily available for purchase through the U.S. exchanges. Another good Japanese company available through American Deposit Receipts (ADRs) is Nintnedo Lt.. The next time you meet with your financial advisor, you might want to ask him/her about foreign stocks and bonds. Good Luck! Here’s to a prosperous 2007!!
