Safe investments can be hard to find. What is perceived as safe often is not.
How about US government bonds as an example? For decades they have been a guaranteed way to lose purchasing power. Yes there is a pretty good chance that you will get back the dollars you put in and even a bit more in interest. But what will these dollars be worth in purchasing power?
“Less” has been the answer for over 30 years now.
There is no guaranteed safe investment, but the mostly likely way to protect purchasing power is to match investment to expenditure. Since we are global spenders, then we should also be global investors.
To get ahead in this world of inflation we have to do more just invest in bonds or bank accounts as well.
The investing mix that has proven most effective in combining safety and growth for investors who desire a truly “global” exposure to equities is to combine an investment in major and emerging markets.
Michael Keppler recently wrote the following about the use of State Street Global Advantage Major and Emerging Market funds. “The way for investors who desire a truly ‘global’ exposure to equities is to combine an investment in the Major Markets Fund with an allocation (in line with their return expectations and risk tolerance) to its sister fund, the Global Advantage Emerging Markets High Value, which invests in the most attractively priced emerging equity markets worldwide.”
In 2007, investors could have achieved the following returns with various combinations of investments in shares of the Major Markets and Emerging Markets sub funds:
80/20 mix: 18.4%
60/40 mix: 23.6%
70/30 mix: 21.0%
50/50 mix: 26.2%
“According to our analysis, a 70/30 combination of major and emerging markets investments offered a particularly attractive
return/risk trade off over longer periods in the past.
“Emerging markets equities beat developed markets equities in each of the last seven years. Nonetheless, investors considering to add Emerging Markets High Value Fund shares to their core major equity markets holdings for purposes of diversification and return enhancement should have a long-term investment horizon and the willingness and ability to tolerate both upside and downside volatility. This is particularly important in a market environment
characterized by heightened uncertainty.
“As long-term investors know, however, uncertainty affords opportunities as well as risks. The Global Advantage Major Markets High Value portfolio currently has a valuation advantage of roughly 25 % over the MSCI World Index. Given this “safety margin,” the Fund appears to be well positioned at the start of 2008 to continue to reach its long-term investment objective of outperforming the benchmark at below-average risk over investment periods of three to five years.”
You can get a complete analysis of 2007 performance and 2008 outlook for both the Global Advantage Major and Emerging Market fund when you subscribe to our Multi Currency Portfolio Course. Details are at www.garyascott.com/catalog/bldh
I could not agree with Keppler more. We live in a global community. The emerging economies are catching up with the industrialized world but growth is never straight or smooth.
In addition, emerging markets are more likely overbought now than major markets.
Yet to protect the purchasing power of our wealth we need to match our investing to our spending and most of us spend a lot in emerging countries. This means we should have a portion of our investments there as well.
Whether your choice is 70% major markets and 30% emerging or reversed, this is a sound way to diversify.
Join Merri and me this winter or spring at one of our tours and courses are below: Here we are with our last group at La Mirage Garden Spa.
Enjoy the renovations in our colonial hotel El Meson de las Flores .
See the view form this house for sale…unless its gone by the time you arrive.
Another view from the house.
Sleep in a sea breeze at Palmazul where we will stay during the coastal tour.
With views like this.
If you attend all three courses separately the fees are $1,847. Sign up for all three at only $1,499 here. Save $348. Three course savings.
Three courses for two separately are $2,597. Two on our three course adventure is only $1,999. Save $598. Three courses savings for two.
Here are a group of previous delegates boating to a shamanic ceremony on Lake Cuicocha