|
DON’T
PUT ALL YOUR EGGS IN ONE BASKET.
The Truth About Global Investing
and Why You MUST Consider It!
By GARY A. FERRARO
Contributed by Guardian
Trust Company (Asia) Ltd
IMPORTANT
WARNING: This article has been offered in good faith
by Investorsoffshore.com to provide assistance to investors
but does not constitute investment advice or recommendations.
Investors should not rely upon the information given
in order to choose types or routes of investment but
should make their own independent enquiries before making
choices. Investorsoffshore.com has taken reasonable
care in researching and presenting the information herein
but makes no representations as to its accuracy and
accepts no liability for actions taken or not taken
as a result.
Nearly
all investors have heard the term “Global Investing”
or “Offshore Investing” at some point during
their quest for successful, superior investment performance
for their investment portfolios. They have heard the
stories and read the news yet few investors really understand
the compelling, incredible benefits, advantages and
investment returns that can be achieved with global
investing and even fewer know where to begin and who
to turn to.
What
is Global Investing? Global Investing is a comprehensive
investment strategy focusing on the creation of, execution
of and monitoring of a well-diversified, risk-tolerant,
world-wide portfolio of investments across a broadly
diversified, balanced spectrum of investment categories
and asset allocations, which includes both investments
located within and outside the country or residence
of the investor.
Global
Investing takes into consideration the importance of
and relevance of, or lack thereof, different geographic
areas and markets of the world, societies, cultures,
social trends, financial systems, demographics, economic
and financial trends, industrial trends and requirements,
political trends, natural resources trends and geology.
Investors
are often surprised to learn just how many products
and services they use which are NOT made in the country
where they are a citizens and/or reside. The list of
brand names would be long and quite familiar. The MESSAGE
learned is LOUD and CLEAR. Virtually all investors are
“Global CONSUMERS” – yet not many
are “Global INVESTORS”.
The
time has come for all investors to open their eyes to
and participate in the immense investment opportunities
the world's markets offer. If you are not already actively
engaged in global investing, then you are hurting and
diminishing your financial and investment performance
in a MASSIVE and DEVASTATING way. To Survive and thrive
as an Investor, you will need a radical shift and new
approach to investing. The Solution is Global Investing.
The COMPELLING CASE for Global Investing is clear!
1)
OPPORTUNITY and CHOICE is DRAMATICALLY Increased.
1. Investors who put their money only in their own country’s
equity markets (stock markets) are missing out on usually
the VAST MAJORITY of the world’s total investment
market place and total market capitalization.
2. These same investors also deny themselves access
to approximately 75% of the total equity/stock market
universe.
3. Many of the LARGEST industries in the world are dominated
by companies NOT domiciled in the home country of most
investors.
2)
DIVERSIFICATION and its CRITICAL importance.
While most investors tend to focus primarily on domestic
markets, there is a world of investment opportunities
beyond their shores. The importance of diversification
across different geographic regions, diverse economies,
financial systems, societies and cultures, demographics,
investment styles, market caps and industry sectors
has become quite clear, yet most investors lack foreign
exposure.
Through
a global investing strategy, individual investors can
gain exposure to the leading global companies, world
economies, business cycles, worldwide currencies, stock-price
valuations and obtain access to global leaders in industry
and government. The largest and most sophisticated investors
and financial institutions have FOUR times the allocation
to international stocks and investments as compared
to the average individual investor. Not surprisingly,
this global investment allocation produces results that
are a MINIMUM of 20 PERCENT better than the typical
non-global investment strategy.
3)
RISK REDUCTION:
Global investing has been repeatedly proven to demonstrate
LOWER RISK. Despite the common misconception and conventional
wisdom that the international markets are “too
risky”, the facts are that the greatest risk individual
investors are taking is to NOT be investing enough of
their portfolio (or any of it at all) – in global
markets.
Global investing also creates lower portfolio volatility.
When you invest and diversify globally you actually
REDUCE the risk to your overall portfolio. This has
been repeatedly PROVEN in studies which show that investors
holding both domestic and global investments have consistently
experienced LOWER volatility in EVERY five-year period
cycle since 1974.
4) DIVERSIFICATION AWAY FROM THE NORTH AMERICAN AND
US INVESTMENT MARKETS.
For
a very long time the U.S. markets were heavily invested
in by global investors. The tide is now turning and
it is clearer than ever before that any global investor
who is TOO HEAVILY allocated to investments in the U.S.
markets is facing the potential for catastrophic investment
losses.
The US Dollar has fallen DRAMATICALLY against most major
currencies not only over the short term but over the
long term. In fact, in October, 2007 the US dollar reached
its lowest point in decades and the trend is “going
lower”. If your primary local currency is pegged
to the US dollar, you better watch out and take action
now. The US dollar is also regarded as a fiat currency
backed by the "Full Faith and Credit of the United
States of America" yet the United States Federal
Deficit is at an all time MULTI-TRILLION DOLLAR HIGH.
Add to that such facts as: 1) the strong, steady rise
of Gold and Silver prices; 2) that Oil prices are at
all time highs; 3) that major countries like Brazil,
Russia, Germany, and China and most of the Middle East
have announced they are anti-US dollar and are switching
out of dollars into Euros for financing and for conducting
trade in oil; 4) significant reductions in foreign reserve
holdings of US Treasuries; 5) that the Middle East continues
to have tremendous instability and problems that is
NOT going away anytime soon; and, last but not least
6) HUGE, SERIOUS problems in the US housing and mortgage
markets.
5)
DIVERSIFICATION AWAY FROM THE RISK OF DERIVATIVES.
Derivatives
are a ticking time bomb and the financial weapons of
potential financial mass destruction. The Total global
derivatives market is valued at a staggering US $272
TRILLION based on recently available estimates. This
figure is more than SEVEN times the size of the entire
global economy. Even more disturbing is the fact that
of this total, nearly one third of these derivatives
(approximately US $77.6 trillion) are held by and concentrated
in only three American Banks (JP Morgan Chase, Bank
of America and Citigroup), based on recently available
estimates. Currently only several banks hold most of
it. Every investor would be wise to thoroughly investigate
if their bankers are among the list.
6)
DIVERSIFICATION AWAY FROM THE RISKS ASSOCIATED WITH
MONEY SUPPLY, CREDIT AND DEBT.
Many
financial systems, like the USA, are a system of debt
created by the printing of money and the creation of
credit, which is essentially money in digital form.
This creation of credit is now out of control in key
areas of the world financial markets, which will result
in further devaluation of certain currently important
currencies like the US dollar, the subsequent rising
of inflation rates, very likely real estate crashes
in certain markets, another highly likely stock market
crash of bigger proportions, a continued surge of personal
and business bankruptcies and a resulting domino effect
of bank and insurance company failures.
7)
PERFORMANCE.
Many
of the world’s best performing stock market indices
and mutual funds are NOT located in the country of citizenship
and residence of most investors and the investment return
of many of them is up an astounding 1,000 plus percent.
It is not unusual at all for global markets to OUTPERFORM
an investors domestic markets. It is also not unusual
for the top ten companies in each industry sector to
be located outside of the country of citizenship and
residence of most investors.
Global investing also creates higher return in relation
to risk. Consensus from worldwide studies has shown
that a minimum 40 PERCENT global allocation has given
investors the highest return per unit of risk. Historical
data have also proven that the optimal exposure to international
stocks and investing, as a means for reducing risk,
has changed very little over the years.
8)
VALUATIONS.
Very
often non-domestic markets have much more ATTRACTIVE
and REALISTIC Valuations. As an interesting example
the Price per Earnings Ratio P/E. of stocks in the important
China Shanghai A-share market is much higher that the
P/E of the very same stocks listed on the Hong Kong
Hang Seng stock market.
9)
DEMOGRAHIC TRENDS.
Non-domestic
markets for many investors have much more favorable
demographic trends. Currently these trends are much
more favorable in Europe and Asia, where age and population
peak there many years from now. In contrast, the US
population is an aging society and has peaked, and there
are fewer new births. China and India are currently
power house markets of hungry, aggressive consumers.
10)
CURRENCY TRENDS.
Non-domestic
markets often have much more favorable currency trends.
For example, the US dollar continues to fall both long
term and short term against virtually every currency
of the world. The foreign currency market is the BIGGEST
market in the world yet many investors do not take advantage
of the potential for investment profit that is inherent
in this huge market.
11) ASSET PROTECTION.
Very
often global investment using non-domestic markets can
assist an investor in achieving better asset protection
than if done domestically. Using proper planning and
legal structures like the Nevis-based LLC (Limited Liability
Company), IBC (International Business Corporation) or
Trust, foreign investments can be made through these
legal entities to achieve many objectives including
asset protection and/or tax planning.
12)
TAX PLANNING.
Global
investment using non-domestic markets can often assist
an investor in achieving better tax planning or tax
deferral than if done domestically. Using proper planning
through legal structures like the Nevis LLC, IBC or
Trust, or by using foreign variable life insurance or
variable annuities, an investor can create powerful
potential tax deferral and tax planning as well as asset
protection.
13)
INTERNATIONAL TRADE AND BUSINESS.
Non-domestic
markets can assist an investor or business owner in
the profitable expansion and diversification of their
business activities to other markets. In fact a business
may find that it can build greater revenues and profits
by primarily or solely selling its goods and services
outside of its domestic markets.
14)
SAFETY OF PRINCIPLE.
Non-domestic
markets can often provide greater safety for capital
or other tangible or intangible assets. The foreign
currencies of another market are often stronger and
more stable to conduct business and investments. In
addition foreign jurisdictions are often more friendly
and stable, including many banks and financial institutions
which are stronger, more stable, have been around longer
and have fewer failures.
The
reality is that global investing offers unrivaled opportunities
for superior investment returns, prudent investment
diversification, lower risk, potential tax planning
benefits, potential superior financial privacy, asset
protection and estate planning. The bottom line is clear
-EVERY investor should be investing globally.
About
the Author:
Gary A. Ferraro is the President
and Chief Executive Officer of Guardian Trust Company,
the Wealth Management Institute, and the Kredit Privee’
Group of companies. He may be contacted at Guardian
Trust Company via phone at 852-2251-8178 or via e-mail
at admin@guardiantrustcompany.com
|
