Political coups, rampant inflation, debilitating deflation, capital controls, civil unrest… any one of these could scare investors out of a particular region. Yet each of these daunting events occurred in a market that outperformed the US over the last 10 years.
Few, if any, would have predicted in 2004 that Colombia, Egypt and Indonesia would have been at the front of the pack over the coming decade. Even trendy picks like China or Russia provided only average returns. During that decade there was an average difference in return between the best performing country and the worst performing country of 102% per calendar year! Year to year there was no consistency in individual country returns; the only thing you could count on was that the country that did the best the previous year was probably not the one that would do the best the next year.
Yet those investors who shunned the volatility of international markets and stayed invested only at home fell behind as the US ranked only 30th out of 45 developed and emerging markets over the last 10 years.
Instead of making a bet on any individual country and subjecting your financial goals to the random extreme highs and lows, holding a well-diversified portfolio of companies from around the world allows you to take advantage of growth wherever and whenever it occurs.
So put away that crystal ball and stop worrying about forecasts. Instead diversify, rebalance, and then sit back and enjoy the global investment returns that come over time.
Source: Morningstar Direct 2014. Country performance based on respective indices in the MSCI Net Return USD Index. Greece return is S&P Greece BMI TR USD Index. All returns in USD currency and net of withholding tax on dividends. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. All investments involve risk, including loss of principal.
International markets involve additional risks, including, but not limited to, currency fluctuation, political instability, foreign taxes, and different methods of accounting and financial reporting. As a result, they may not be suitable investment options for everyone.
Diversification neither assures a profit nor guarantees against loss in a declining market.
The buying and selling of securities for the purpose of rebalancing may have adverse tax consequences.
LWI Financial Inc. (“Loring Ward”) is an investment adviser registered with the Securities and Exchange Commission. Securities transactions are offered through its affiliate, Loring Ward Securities Inc., member FINRA/SIPC. IRN R 14-096 (Exp 3/16)