When I started in this business over 22 years ago, most people were excited about investing in U.S. stocks. If we suggested adding international stocks to their portfolio, many were very leery. Investing money in faraway places they’d never been to, in companies they had no connection with seemed very risky, almost unpatriotic. We pointed out that the Levis they were wearing, as American as it gets so they thought, were not made in our country. The Bayer aspirin they had in the medicine cabinet was made in Germany, the Barbie dolls loved by their little girls were made in Hong Kong, and so on. Slowly clients began to accept the fact that we were evolving into a global economy.
You might think that by owning an S&P 500 Index fund, widely held as a barometer of the U.S. stock market, you’d be investing only in the U.S. In reality however, as much as 50% of the sales and profits from those American companies come from overseas markets.* In this day and age it’s almost impossible not to be invested in the global economy, even if you buy a “U.S.” stock fund. Many U.S. companies have become multinational corporations. Even though they may be based in the U.S., they’ve chosen to broaden their market share by expanding overseas where there are consumers eager to buy American products. Many U.S. companies don’t even make their products in America because they can find cheaper labor markets overseas. You don’t necessarily have to invest in foreign markets directly because U.S. companies are doing it for you!
I bring this up in light of the recent market turmoil driven in part by China’s weakening economy. If the recent roller coaster ride has you convinced to steer clear of international investing, consider that investing is kind of like making a recipe. Once everything is mixed together, it’s pretty tough to remove one ingredient!
*Forbes/Investing-August 14, 2011
Linda Eden is a Registered Principal offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.
Copyright ©2015 Linda Eden. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.