The investment world is no longer a respecter of national boundaries. So your portfolio shouldn’t be limited by them either.
It is well known, that exposure to global stock and bond markets can reduce the variability of your total portfolio while increasing its returns. This is because not all economies are directly tied to the performance of the US. Corporations that serve markets outside of our economy will be on a different business cycle than our own. There are also a number of firms whose operations are principally tied to the fast-growing emerging markets. By investing in some of these we can profit from their development. In addition, there are truly global companies that do business around the world. It makes sense to invest in world-class corporations, irrespective of where their headquarters happen to be located.
The investment case for having a global exposure is therefore well-established. How do we accomplish this, then, and manage the risks? For the risks are real: currency risk, political risk, and accounting risk. By exposing ourselves to foreign markets, we take the chance that any of these things can move against us.
Finally, we use common-sense limits in our investing. While emerging markets can be hot investments, they also carry more political and accounting risk. We therefore use investments in countries like China or South Africa in the context of a globally diversified portfolio, but we don’t go overboard. In international investing, as in much of life, moderation is the best policy.
By investing in globally diversified portfolios our clients can benefit from global economic growth at a lower volatility than they would likely experience by just being invested in US markets. Just another benefit of investing with Charter.
