Four Reasons You Should Still Invest Abroad

For the most part, international investing has been a disappointing prospect over the past several years.  Here's a recent performance chart of various broad-based international Exchange-Traded Funds (ETFs) going back to the time around the March 2009 market bottom and through the back-end of July. The S&P 500 is in bright red on the immediate left for comparison

Even a quick look will show that while international performance in some instances has been quite positive, all have paled in comparison to the S&P 500.  The good old USA has been the place to be in this period. Some of these markets, like Latin America, haven't justified the risk of investing in them during this time.  

In such an environment, it could be tempting to turn our backs on foreign markets and just eat our home cooking.  Blackrock's Russ Koesterich tells us in a recent article why it might be a mistake to give up on investing abroad.  Here’s part of the case that Russ makes:

Safe, But Not Necessarily Profitable

It’s easy to look at the significant gains the S&P 500 has been making and decide to play it safe and stay loyal to domestic investing. But even though the market could still improve and see even more returns, current levels have historically correlated with lower future returns. Is it worth it to stay safe and sacrifice future earnings just because the international market is currently low?

Emerging Market Comeback

While emerging markets have been lackluster for the past five years, they are starting to show signs of recovery and stability. While these indices have posted double-digit returns so far in 2016, their valuations are still not what has historically been seen as expensive. Emerging markets may be over bought right now owing to these gains but they might be worth a second look when we experience a correction.  Keep in mind that emerging market indices and their ETFs are typically more volatile than their US counterparts.

Bear Market Differences

In a real bear market, U.S. stocks will continue to suffer. Even though a bear market may not affect the U.S. as much as other countries, the point is that stocks aren’t the only place to invest. Other asset classes, such as investment grade bonds or preferred stocks, offer more security than regular stocks and still give decent returns if we return to that type of environment.

All in all, don’t go to extremes. Don’t abandon international markets, but also don’t disregard the U.S. economy. Create a balance in your investments to reap multiple rewards. If you have any questions about the international market or want to know how to build a stable portfolio that will provide returns, please contact us at 708.488.0115 or by email at lumencapital@hotmail.com.

About Chris
Christopher R. English is a money manager and the founder of Lumen Capital Management, LLC, a Registered Investment Advisory firm. Specializing in investment management and developing customized portfolios that reflect a client’s values and needs, he has nearly three decades of experience working with individuals, families, businesses, and foundations. Based in the greater Chicago area, he serves clients throughout Illinois, as well as Florida, Massachusetts, California, Indiana, and other states. To schedule a complimentary portfolio review, contact Chris today by calling 708.488.0115 or emailing lumencapital@hotmail.com.

*Performance chart is from Stockcharts.com

**We are invested in indices related to the S&P 500 and certain international markets for clients and for our own personal accounts via ETFs.  Please note these positions can change at anytime without notice.