Wednesday, March 25, 2009

The Case for International Investments

Brett Arends of the Wall Street Journal has an interesting piece out today called Ten Reasons to Invest in Global Funds. Here are a couple of points I found compelling.

1. You have plenty of exposure to the U.S. economy already. You work here. You may own a home here. And so, in most cases, do most of your friends and family. You hardly need to double down.

That's a good point. We don't realize it, but we're all exposed greatly to the U.S. economy. We don't need to plow all of our additional investments into it as well.

4. The U.S. stock market is the biggest and best-known market in the world. Thus, it is more likely to be overvalued than foreign markets. That's bad news for investors. Right now, according to FactSet, the domestic market trades on 1.7 times book value. The rest of the world: 1.1 times.

Not only is the U.S. market most likely to be overvalued, it is the most scrutinized and analyzed. In international and emerging markets, companies and sectors don't catch as much attention as those here. This allows for more inefficiencies in how the market prices things, which can work to your advantage.

To me, one of the largest reasons to invest globally is it's easier than ever. There have always been compelling reasons to invest in other countries, but in the past, it has been difficult for the average investor. Now there are hundreds of ETF's, and many more international stocks are getting issued here as well.

I'm a believer in this thesis, and I have a large portion of my personal investment dollars in international investments.

No comments: