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Guarding Your Wealth for Senior Citizens
Is Investing Overseas a Trend or Just a Fad?
There is a reason overseas markets are performing so
well
By Jeffrey D. Voudrie, CFP
May 26, 2007 - The returns on international mutual funds have far
out-paced those earned by U.S. funds for the last several years. As a
result, there has been a deluge of money flooding into these funds. Is
this the 1999 Tech Bubble all over again? Read on to find out.
Investing in technology stocks was the big thing in
the late 90’s. Internet startups that didn’t have a dollar in sales were
raising billions of dollars in an IPO. The value placed on companies was
outrageous. Anyone remember Priceline.com? In 1999 the stock hit a high
of over $300. A few years later it was trading at $5 a share. Will the
same thing happen with International stocks?
The short answer is no. Investments in foreign
companies haven’t reached the frenzied pace seen in the Tech Bubble.
Moreover, there is a reason overseas markets are performing so well.
It’s essential you understand the underlying trend so you can properly
allocate the place international investments have in your portfolio.
My wife and I recently returned from a short trip
to Cambodia. My experience there has given me a greater appreciation for
and an understanding of the development under way in Asia.
Cambodia is a very poor country. The average annual
income per person is $2,000. And they’re still recovering from
atrocities of the Khmer Rouge in the late 1970’s, when 2 million people
died. Now, 40% of the population is under the age of 15.
The human spirit, though, is the same everywhere.
Ambition and desire are not American attributes; they are basic to human
nature. And that’s what I saw in Cambodia. Many are working to improve
their own lives and those of their families. That means commerce.
Cambodian wages are very low so foreign money is
flooding into the country. Garment factories are being built and employ
thousands. That’s causing land prices to double and triple in value.
Family rice patties are now sold for tens of thousands of dollars. Their
sale completely changes the lives of that family.
Invariably, they buy a car and home. They buy
furnishings. That money trickles through the economy, raising the
standard of living each step of the way. Multiply that by thousands and
thousands and you can see the impact it has.
The capital of Cambodia is Phnom Penh. Just 5 years
ago many of the streets there weren’t even paved. Now they are. New
roads are being built and hydro-electric dams are being planned.
Cambodia is just one example of what is happening
in countries all across Asia. In China and India alone there are over 2
billion people. Most of them have lived in poverty all of their lives.
But that is changing. Standards of living are increasing.
Will this rate of growth continue forever? No. But
I believe it will last a decade or more. The rate of growth isn’t going
to be constant. There will be cycles just like there are in any economy.
There’s no denying the overall trend, though.
What does this mean for your portfolio? I believe
that many investors should have a substantial part of their portfolio
invested outside the United States. Our economy has been growing around
3% a year. China and India’s economies are growing around 10% a year.
Traditionally, experts have suggested that 10-15%
of your portfolio be invested internationally. Now some suggest 25%. I
believe it should be higher than that.
The problem, though, is that you can’t just throw
money into an overseas mutual fund and forget about it. These markets
can be very volatile. China’s market dropped almost 10% in a single day
earlier this year. It’s vital that this money be invested wisely, that
it be closely monitored and that strategies are in place to reduce the
overall risk.
That’s what I’ve been doing in my clients’ accounts
the last year or so. Some of the stocks that have performed very well
are Bayer (BAY), Siemens (SI) and Bunge (BG). There are investments in
Canada, Europe, Russia, Israel, Brazil, Australia and all across Asia.
Using targeted companies to profit from such trends
is better than just buying an index. When balanced with other
income-oriented investments and loss-limiting proprietary strategies,
the result is a portfolio that is designed to have greater growth
potential than one focused only in the United States.
It’s important that you have money invested outside
the United States. The growth in emerging markets like China and India
isn’t a fad, but a trend that could last for decades.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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