Morningstar.com readers are all over the map on the question of how much of their equity allocation comes from the United States.
By Adam Zoll?| 07-07-13?| 06:00?AM?|?Email Article Portfolio allocation can be a tricky business. First you must decide what percentage of assets to invest in stocks, bonds, and other asset classes; then how much belongs in small-, mid-, and large-sized companies; and then whether to tilt more toward value, growth, or somewhere in between. Along the way you also have to answer a question that can be among the most complex: How much do I invest in U.S. stocks, and how much do I invest overseas?Adam Zoll is an assistant site editor with Morningstar.com
Although it might sound simple, that question raises its own unique set of challenges. As many Morningstar.com users noted in response to a question posted to the Hands-On Investing area of our Discuss board (you can read the full discussion here), merely knowing where a company is based doesn't necessarily tell the whole tale because many companies operate internationally. In today's increasingly globalized world economy, the line between U.S. and foreign stocks gets blurred.? 'The Home Country of a Corporation Means So Little'Carman's comment was typical of many. "I'm about 80% U.S. and 20% foreign (mostly Europe) at the moment," carman wrote. "I see no compelling reason to change this ratio because the home country of a corporation means so little in?a?global economy. I've steered clear of significant emerging countries holdings because so many of?these?exhibit political instability or lack a meaningful regulatory environment." A number of posters echoed the idea that investing in U.S. stocks that do business abroad provides international exposure without some of the complications that go along with investing in companies based outside the U.S. For example, wenzela said, "The only 'foreign' stock I own is BP BP. Otherwise it is all U.S. companies. Most of my major holdings are global firms doing a large part of their business in other countries. I consider that plenty of diversification. Besides, it is much easier to read U.S. financials, and also my income planning is more predictable with regular quarterly dividend payments." "My stocks are 80% U.S. and 20% foreign, which is the lowest my foreign exposure has been in 10 years (originally it was 65% U.S. and 35% foreign)," wrote rossinator.?"I find investing in the U.S. is a lot simpler for me.?First, I can know and research the companies a lot better, and I am less buffeted (but not totally free) from foreign currency, foreign government, international strife issues that arise in other parts of the world." 'The Cleanest Dirty Shirt'
Others in the discussion said the equity portions of their portfolios tilt toward U.S. stocks simply because they seem like better bets than foreign stocks these days. Overall the U.S. represents about 47% of the global market cap. Mickeg wrote, "I generally prefer to weight my foreign holdings to about 50% to 65% of my total, but in the current global environment, I find U.S. exchange-traded funds to be the best place to be. To use an overly used phrase, U.S. stocks are the 'cleanest dirty shirt' out there right now.?Thus, I consider my 90% domestic holdings now to be a temporary overweighting of U.S. equities." Grandmarais wrote, "I'm currently about 62% U.S., 17% Europe, 2% Japan, and 19% emerging markets. I'm big on playing the historical trends, so was big in emerging markets (40%) for the last 10 years. Did well for a while, but the political climates/practices in China and South America have led me to draw back.?Europe is just a timing play.?The U.S. certainly looks the strongest long-term." "Presently I have a conservative portfolio with 45% in equities, 7% of which are foreign equities through investing in U.S. large-cap funds and some world-allocation funds," said yeagermj. "I didn't start following foreign markets until 2007 and fortunately have ignored the advice of my financial planner to jump in every time they dropped. I don't trust their accounting standards and I see no need so far to add the accompanying volatility to my portfolio.?I've had good returns without them." Artsdoc, who said the equity side of their portfolio is weighted at about two thirds U.S. stocks and one third non-U.S., admitted to having a home bias and gave three reasons as to why: "1) There is currency risk associated with holding international equities, 2) it is more expensive to own since they're more expensive to trade abroad, and 3) the expense ratios are higher to own internationals although the fees have come down considerably over the past few years." Then there were those commenters who took home bias almost to an extreme. One was banker5358, who wrote, "Except for
?Potash Corp.?, I have never knowingly purchased a foreign stock." Cliff said, "I hold investments in 30 companies, 26 of which are U.S. companies that derive almost 100% of their revenue domestically. Two are Canadian. The other two are ?Philip Morris and ?Diageo , which sell all over the world. I'm probably 99% truly domestic in terms of revenue and free cash flow." 'An Opportunity to Buy Into Beaten-Down Sectors'But not all commenters were sold on the idea of being heavy in U.S. stocks. Several mentioned allocating their equity holdings in a more balanced way. ? "We are 50/50 domestic and foreign,?betting on?growth?in the U.S., value in Europe, and a growing middle class in Asia," wrote Wartybliggins.?"While always with a strong percentage in overseas funds,?we've arrived at?the current?ratio by profit taking on domestic investments for a larger allocation to cash." Academic, whose?equity allocation is tilted 51% toward foreign stocks, added, "I've been steadily increasing the proportion of equity allocated to foreign stocks over the last year. This is based on valuation measures that show U.S. stocks overvalued relative to foreign. Unfortunately, that particular move hasn't worked out so far."? Meanwhile, BMWLover sounded a contrarian viewpoint. "All the experts are saying that the U.S. is the place to be investing right now because of its prospects for the best economic growth in the near future," said BMWLover.?"True, the Eurozone is still experiencing economic problems and emerging markets have seen their growth slow. And to that point, in general, prices of equities from foreign-based companies and international and emerging market ETFs are well off their highs. I see this as an opportunity to buy into beaten-down sectors. I'm buying at lows with long-term (three to five years) expectations of watching these investments reach new highs." Carrie said that even though her portfolio is tilted toward U.S. stocks, that's changing. "Seventy-five percent of my stock portfolio is?U.S.," she wrote. "However, all of my 401(k) contributions have been going into a?foreign-stock fund?(heavily weighted toward Europe)?for a while now because that's where I see opportunity."
Be Seen. Be Heard. Become a Morningstar Contributor.
Reach a readership of advisors, professionals, and active investors. Submit your commentaries for publication on Morningstar.com.
PERSONALFINANCE
CAN_POT,USA_PM,USA_POT,USA_DEO
E0_CAN_POT E0_USA_PM E0_USA_POT E0_USA_DEO &primaryKeyword=PERSONALFINANCE
2
Source: http://news.morningstar.com/articlenet/article.aspx?id=601722
joakim noah Of Monsters and Men boxing news mint julep silk Star Wars Cinco De Mayo History
No comments:
Post a Comment