Daily Gains Letter

Six Ways to Manage Your Retirement Portfolio with Profits, Not Politics

By for Daily Gains Letter | Apr 8, 2013


If you’re looking for an anxiety-free way to invest in your retirement portfolio, you’ll be looking for a long, long time. Maybe even an eternity. There may be a statistical element of certainty with rock-paper-scissors, but that’s not true for Wall Street.

And there are a lot of reasons to be skeptical about the U.S. economy and the near- and long-term outlooks of the American economy. Sure, the Dow Jones Industrial Average and the S&P 500 are notching up their record highs—but that has more to do with the Federal Reserve than it does the economy.

For the average American, the U.S. economy is nothing to feel cheery about. The unemployment rate is stubbornly high, as is household debt. Consumer confidence is down, and housing, the so-called “bright spot” in the market, is arguably fragile at best. While housing is showing buoyancy, prices are still down 41% from their 2007 peak.

Investors seeking to manage risk and diversify their retirement portfolio may want to look beyond the constraints of our geographic borders.

For savvy investors, it’s about profits, not politics or popular opinion. And for those not quite content with the economic disconnect in America, it might be time to consider adding a global position to your retirement and investment portfolio.

Over the last decade, roughly 14,000 companies have gone public, more than 90% of them outside the U.S. And some will realize U.S. market-beating returns, because they are better positioned to take advantage of global opportunities. (Source: Espinoza, J., “A Smarter Way to Invest Globally?,” Wall Street Journal June 4, 2012, last accessed April 5, 2013.)

At the same time, there are those who think internationalizing their investment portfolio is flawed, because there is no direct correlation between where a company is headquartered and where it makes money.

But that’s the whole point to taking a global perspective with investing. You’re not concerned about where the company is headquartered—it’s about profits, not borders or politics. Yes, there are a large number of amazing international companies trading on American exchanges. Drug manufacturer Novartis AG (NYSE/NVS) is based in Switzerland and generates the majority of its revenues outside the U.S.

At the same time, there are a lot of excellent international companies with amazing long-term potential that are unjustly ignored, simply because they are not listed on American exchanges.

The point isn’t to find global equities that make money outside the U.S. It’s to find profitable, fundamentally solid, globally traded stocks that are geographically diversified. If you’re considering international brands but don’t want to stray too far, you just have to shift your gaze northward to Canada.

CCL Industries Inc. (TSX/CCL-B), the world’s largest maker of specialty labeling (“Tide,” “Heineken”), is up 42% in 2013, and remains the best amongst 239 members in the benchmark Standard & Poor’s/TSX Composite Index. A leading provider of ATMs, DirectCash Payments Inc. (TSX/DCI) is up 10% year-to-date. Intertape Polymer Group Inc. (TSX/ITP) provides packaging and tapes and is trading up 37% in 2013.

On the other hand, for those who don’t want to look at individual stocks but would rather hold an international bucket of equities, there are a large number of global exchange-traded funds (ETFs) traded on U.S. exchanges. The Vanguard Total World Stock Index ETF (NYSEArca/VT) includes approximately 7,240 stocks of companies located in 50 countries, including both developed and emerging markets. First Trust DJ Global Select Dividend (NYSEArca/FGD) is made up of 100 stocks selected from the developed market-portion of the Dow Jones World Index. A new kid on the ETF block, iShares MSCI All Country World Min Vol (NYSEArca/ACWV) comprises approximately 270 equities from both emerging and developed markets that have lower absolute volatility.

To paraphrase the late Sir John Templeton—the man Money magazine calls arguably the greatest global stock-picker of the 20th century—the best way to make money is to view the investment world as an ocean and to buy equities that offer the greatest value.

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