Nov 01, 2012
If you follow the daily news cycle at all, you are probably getting a lot of news exposure to things that are pretty meaningless in the context of a global asset allocation. Think about it for a minute -- a typical 'growth' allocation portfolio might be 75% risk assets and 25% income-oriented ('spread product' or gov't bonds). Of that 75% risky, some percentage is U.S. equities -- and some percentage of that might be risk assets OTHER than US-based common stocks. Already, we are taking a percentage of a percentage.
Then you think about how much coverage CNBC and other media outlets give to domestic company earnings reports -- and then compare that to something like the coverage of the entire "Asia-Pac" regional ETF investment opportunity. Do you really need any coverage at all on Zynga and GroupOn?
Let's put it another way -- how much have you heard about the Pacific Ex-Japan segment (Australia, Hong Kong & Singapore all combined) returning +20% this year? Just the Hong Kong market alone has a weight in the Global index well above that of Apple or any other single stock. Apple is of course a very important company and you should certainly pay attention to it -- but then you should also think about global investing opportunities at least as much (more) than you think about any specific individual U.S. company. If you don't, you will be missing a lot of opportunities that may provide leadership for extended periods of time.
Let's look at the last ten years as an example. While the U.S. market was leading the worlds equity markets for much of 2011-2012, keep it in context of what happened prior to that:
Home country bias is to be expected to a degree -- people invest in what they know. Moreover, prior to the ETF movement it was somewhat difficult to find low-fee vehicles that access international markets. But that has all changed. It's now ultra low-cost (no purchase fees, low expense ratios and in some cases zero commission).
The rankings chart below demonstrates a shift in relative strength that have been picked up and reflected in our Allocations Board portfolios back when it was occurring -- in August. If you were just following news on a set of specific U.S. companies, you probably weren't paying attention to things like this.
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