American investors have preferred to stay home with their portfolios throughout most of the two centuries following the beginnings of our American stock market. Since its founding in 1792, the New York Stock Exchange and those which followed, e.g. the American Stock Exchange and NASDAQ, have promoted domestic stocks and bonds. About fifty years ago the search for investment opportunities by American investors widened. During the 1950s American investors began to follow and purchase securities in European and Asian markets, breaking the trend that favored only domestic companies.
Perhaps the first global mutual fund widely available to North American investors was established by Sir John Templeton in 1954. Other fund companies followed with funds of foreign and domestic securities and funds with foreign securities only. In the early 1960s Canadian stocks were selling at very low prices relative to their earnings. In the 1970s the shares of Japanese companies were considered bargains. Through the years, the securities of various countries have attracted investors from Europe and Asia. From 1984 through 2003 the best-performing country equity markets didn't include American stocks. Among the winners of the investment Olympics were Austria, Belgium, Finland, Greece, Hong Kong, Japan, New Zealand, Portugal, Spain, and Switzerland. Our American stock market did very well during those twenty years, but these foreign markets beat ours in each year.
The World is very large but in many ways it's getting smaller. International trade continues to expand into industrialized and non-industrialized nations. The most competitive markets win. Capital flows to the winners. The way for American investors to participate in this race is to position a portion of their assets internationally.
It makes good sense to diversify. If you restrict your portfolio to only one stock, or one industry or one country, you are not participating in the broader global securities market. You might own a car made in Japan, a computer chip made in Taiwan, toys and ceramics made in China, recorded music from England, wine from Italy (you thought I was going to say France?), fashions from France, etc. Why not consider the opportunities of investment in these growing economies?
Call me to discuss the global options for your portfolio. In a global economy I believe we should invest globally.