JULY 1: Having Concerns Over A Potential Investment Opportunity Offshore

by David Jenyns on July 1, 2007

When you start to seriously look into having your money work for you, over time you’ll realize that if you want above average returns, you’ll have to look further than the borders of your home country. Once you start considering investment in terms of the whole world, you’ll see that it doesn’t make sense to have your all of your investments or money tied to one particular country or currency.

Not only does global investing outperform the US, but it reduces the overall risk to your investment portfolio, and any serious investor should really look into these opportunities. A globally diversified portfolio can absorb the hiccups that a geographically concentrated portfolio might otherwise be forced to feel in its entirety.

When I first realized this, I began looking at major stock markets around the globe and found that every twelve years; each one had a downward trend – but not all at the same time. So, by adopting a global approach, I was able to have my capital working constantly.

By choosing to take the benefits of investment opportunities offshore, you increase your opportunities, enhance returns and diversify risk. For example: the Morgan Stanley Capital International Index has 21 stock markets around the world, including Japan, and most of the developed markets in Europe and Asia posted a 15.1% compounded annual return for the 25 years since its inception in 1970.

This was almost half again as good as the return of 10.7% for the same period for the top 500 companies traded upon the New York stock exchange as rated by the Standard & Poors.

Fascinatingly, 13 of the 21 MSCI markets out-performed the US market by quite considerable margins during that very same period – the Japanese market alone between 1948 and 1993 gave 20 times the return of the S&P 500.

A clever investor wouldn’t provide all their money into one company alone, so why would they put all their money in one country or currency?

The strength of a country’s currency will affect your buying power; the prices of real estate are connected to that country’s inflation and interest rates; and income, purchasing power and standard of living make a compelling argument to seek investments outside of your current country of domicile.

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