The Investment Scientist

Why A Global Diversified Portfolio?

Posted on: March 22, 2016

capitalmarkets.jpgRecently a client asked me why we bother with investing in international markets.  After all, the S&P 500 has done quite well in the last year. Indeed, it has outperformed foreign markets three years in a row, and by a huge margin to boot. Take 2014 for example-the S&P 500 was up 13%, while the international markets on aggregate were down 5%.

So why then? Well, let’s look at this table …

Screen Shot 2016-03-22 at 7.20.53 PM.png

The decade between 2000 and 2009 is what investors call “The Lost Decade,” but only if you invested  solely in the S&P 500. If you had owned a globally diversified portfolio, the decade would not have been lost.

In fact, after The Lost Decade, some of my clients asked me “Why bother with investing in US stocks at all?”

 

My answers then and now are the same: because we don’t know what the future will bring and we don’t know which market will do best or worst, so we need a globally diversified portfolio to limit our  risk of falling victim to another lost decade.

Schedule a Discovery review with me, or get my white paper for free: The Informed Investor: 5 Key Concepts for Financial Success.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



You may also get his monthly newsletter, or join his Facebook page for regular wealth management insights. Michael's email is info[at]mzcap.com.

Twitter: @mzhuang

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