The US markets are reaching new highs daily and many investors are happy with the returns their portfolios have generated. According to the Wall Street Journal the S&P 500 is up 13.9% year-to-date.
But some foreign markets are doing even better.
For example, the Hang Seng (Hong Kong) index is up 29.4%.
Chile is up 28%
Brazil up 27.3%
South Korea up 22.1%
Italy up 16.4%
Taiwan up 15.8%
Singapore up 14.7%
As part of our asset allocation strategy we always include a foreign component in our diversified portfolios. Over long periods of time international diversification has had a positive effect on portfolio performance. That’s because the US economy is mature. It’s harder to generate the kind of economic growth that smaller, newer, and less developed economies can generate.
There is, however, a level of risk as well as reward to global diversification. It’s said that when the US catches a cold, foreign markets get pneumonia.
The U.K. market is up only 5.8% this year, Shanghai +9.1%, Mexico +9.5%, Japan +9.6% and France +10.3%. It’s difficult for the average investor to do the research to pick and choose their own foreign stocks. So it’s even more important when investing overseas to use experienced portfolio managers with years of experience and an established track record.
We have done the research and we choose the best mutual funds with experienced managers to give our clients exposure to foreign markets.