May

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International Mutual Funds

Posted by cameron

May 1, 2007 |

Whenever I have seen a diversification model for stocks the suggested percentage of Internationals has been around 15% of total assets. I never truly understood why 15% was the number but in recent years I have been overweight in Internationals. My reasoning is this: If the U.S. has a certain number of companies that are great investments shouldn’t the rest of the world have more? At any given moment aren’t there more companies poised for a comeback than exist in the U.S.A. To me it’s a numbers game. There is greater opportunity in the rest of the world. I don’t understand limiting myself to 15%. The rest of the world is bigger than that.

In recent times, say the last 5 years or more, International stocks have outperformed domestics. Now I see the World banks forecast for economic growth by region and country:

  • Europe overall 2.3%
  • Britain 2.9%
  • USA 2.2%
  • China 10%

On top of this emerging economies are taking an increasing share of available export markets.

It’s interesting now how a 3% drop in the Shanghai stock market ripples through stock markets the world over. The U.S. is still the largest single economy but most countries are now heavily committed to that 1Bn strong pool of potential consumers in China. The world is diversifying its economy so it doesn’t catch a cold every time the U.S. economy sneezes.

These days I don’t subscribe to the 15% rule, its more like 50%. My best performers are Internationals and there is no end in sight to that. The Japanese got the ball rolling for Asian companies and China is getting ready to take over its mantle. This trend is unstoppable. (What happened to communism?).

I have already committed to Internationals and I see no reason why my commitment shouldn’t become greater as time goes by


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