Investing in the Global Village

By Martin Brown

For Amelia Collins, the decision to invest internationally was a no-brainer. “Austin was a great place to grow up,” Amelia, who is petite, has fiery red hair, and sharp blue eyes, says with an easy smile. “But when I graduated from UT Austin, this was one Longhorn who was ready to spread her wings.”

The 31 year-old single Austin, Texas native, who works as a sales rep for a Dallas manufacturer of computer network security systems, believes that it was extensive traveling in her early and mid-twenties that created a global investment perspective. By 28, Amelia’s travels had taken her from Buenos Aires, to Athens, from Tokyo to Melbourne, from Cape Town to St. Petersburg. “I must admit, that it gave me a much broader view of the world,” Amelia explains. “You don’t have to travel further than your hometown to learn about the benefits of investing globally.”

Her rationale is quite sound. In fact, the popularity of international investing has come about in large part because, recently, domestic investing hasn’t paid. For example, the Standard & Poor’s 500-stock index has gained only 7.6% per year the past three years on average. Now compare that to a 17.1% a year  gain for for the MSCI Europe, Australasia and Far East index.

Fifty years ago people dreamed of the day when we would invest in global rather than just regional or local markets. For many Americans with an eye toward future growth potential, that time has arrived. And as jet travel and the Internet continue to grow, all the citizens of planet Earth move closer to a shared inter-dependent economy.

Along with this emerging new world economy, international investment has grown dramatically. The simplest way to jump into the international investment market is to look at some well respected and well performing funds such as Fidelity’s Canada Fund, or International Discovery Fund.

One word of caution: If you’re a nail-biter, you may not have the tolerance for the risk that comes with investing in international funds. Sure, you may be fine with buying into a fund that invests in Manhattan commercial real estate, but investing in Shanghai won’t allow you to sleep at night.

Nevertheless falling markets can be scary when your watching your nest egg falling along with them. As an example, since 1999 $10,000 invested in Fidelity’s International Discovery Fund is today worth approximately $27,000. While I know you would be pleased with a year in which the fund gained a growth rate of 20%, how would you feel about having a year, like 2008, when that same investment took  a substantial hit? Fortunately, with growth, that has nearly tripled in a nine-year span this fund.

That said, it’s probably a safe bet that two or more of these new emerging economies will out-pace economic growth in the US during the coming decades. A healthy portfolio for the 21st century will need to see further than coast to coast. The successful investor today and in the future is one whose vision will need to reach al the way around the globe.

Amelia for one is supremely confident about her investments. As she explains: “If I work another 35 years, I will retire in the year 2043. Already I have invested in funds that are betting on places like Brazil, China, and India. Every long-range forecast says that these countries and others like them are on the brink of becoming financial superstars. I want to share in their future success.”

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