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Global Diversification

Global diversification reduces the risk of having a single point of failure in a portfolio.
Valuations for international stocks are low based on historical data.
The U.S. dollar has been strong recently but currencies often revert to the mean.
The author makes a case for global diversification.





  • edited November 19
    NHYDY is my only foreign holding. Although JRSH has foreign workplaces, making clothes. 9% total foreign in my portfolio. I'm still seeing low domestic P/E stocks available. Global= diversifier, yes. But the strength of the dollar these days steers me homeward--- even off the greenback's highs.
  • edited November 19
    As of 09/30/22, equities comprised 62% of my portfolio.
    U.S. stocks accounted for 40.4% while international stocks were 21.6% of the total.

    I've invested internationally for decades.
    During the "lost decade" (2000 - 2009), the S&P 500 had a slightly negative return.
    I was glad to own several international stock funds during this period.
    Since 2010, U.S. stocks have trounced international stocks.
    My portfolio's foreign stock funds negatively impacted relative returns during this timeframe.

    Foreign stocks have underperformed U.S. stocks for a long time now and their valuations are more attractive.
    Foreign currencies (broadly speaking) have been weak versus the U.S. dollar.
    There is a high probability that mean reversion will occur in the future and international stocks will outperform.
    Unfortunately, I don't know how or when this will happen.

  • Thanks for the article. My experience with overseas investing has been mixed depending on the time period. Back in the 90’s, actively developed market funds did equally as well as US. After 2008, they lagged considerably as US tech sector dominates. Lately strong US dollar also impose headwind to non-hedged funds. Given the political climate today, more specifically China, our have greatly reduced that since the pandemic.

    We have smaller allocation today largely through value oriented funds, but much smaller than the time period of 90’s.
  • "My experience with overseas investing has been mixed depending on the time period."

    Same here. Did very well years ago, but because of our age have no exposure to market at this time (other than ASML, which is quite enough excitement for me).
  • Good job. You have picked the stock with no comparable competitors for semiconductor manufacturing. Typically a top pick in growth funds.

    Sold majority of our overseas funds last year and now holding few value names that dominate the European stocks.
  • "the stock with no comparable competitors for semiconductor manufacturing"

    Yes, thanks to a non-financial article several years ago in The Economist.

    So I said to myself... cutting edge technology, world is going to need this stuff for quite a while, company safely located in Netherlands, restrictions on selling to China, wide competitive moat... hey, why not?
  • There are a number of key elements to produce nanoscale complex chipsets that China does not have today. They are trying to the entire factories from Germany and England lately but they were blocked for national security reasons. China has come a long way to build up this part of semiconductor infrastructure but they are years behind. Eventually they will catch up. Industrial espionage have been on going with them in stealing someone else intellectual properties and know-hows.

    Same applies to biotechnology such as mRNA-based vaccines. Their version of mRNA vaccines is barely passing the 50% effectiveness requirement against COVID while Moderna and Pfizer vaccines are 90%+ effective. China wants to buy Moderna vaccine but Moderna must disclosed all the secrets within their patents. Moderna refused and there are lots of customers around the world.
  • edited November 21
    "Eventually they will catch up."

    Yes, but as the Economist report said (paraphrase): "By the time China catches up, the technology will have moved significantly further." (Let's hope.)
  • edited November 20
    If they don’t have those critical tools, they may always stay a few steps behind. Make semiconductor chipsets is not like baking cookies. These chipsets are the enablers to build future technologies such as the James Webb telescope.

    Only if they behave honorably and pay Moderna/Pfizer for their vaccines, China would be so much better off without all that lock-down.
  • @Sven
    Only if they behave honorably
    But, the current political structure of China is to dominate, yes?
  • Absolutely! Historically China has been invaded by foreigners and humiliated (opium war). Their doctrine is to compete and over-rule the West one way or other. Lately they have been exerting their political influence across the globe, some are quite alarming.

    Nicholas Borst Of Seafarer funds, who has extensive background on the geopolitical aspect of China. His articles are very informative on investing in China. Here is one example.

    There is nothing that come close to the in-deep analysis on China in Matthews Asia funds.
  • edited November 20
    Only if they behave honorably
    But, the current political structure of China is to dominate, yes?
    Well, yes, but maybe they want to change their ways and dominate honorably (he said naively)...
  • For your info;
    Here is some interesting information on China doing business within the USA.
    China own's 191,000 acre's of America's farmland.
    China own's 2,400 USA companies having 114,000 employee's.
    China produces 97% of the antibiotic's used in the USA
    China controls 80% of the ingrediants used in American drugs.
    " 70% of the worlds Tylenol etc supply
    " own's 8,000 theater screens in USA
    " hope's to build out the 5G network in USA
    " own's/controls 80% of the worlds rare minerals
  • @Derf - just wondering if you have a source or sources for those data.
  • edited November 21
    @Mark ; I received this via E-mail from my Bro. I'll see if he can give me the source & if reliable I'll add a few more tid bits.
    Added : I checked first three (facts) via internet, & more that one article popped up on the three searches.
  • If I were China I would know I could kiss all my USA investments goodbye if there is a war with Taiwan

    More concerning is our dependence on them for materials, especially rare earths
  • @Mark : My Bro said to enter, what all does China own in USA?  That worked for me.
    have a good day, Derf
  • @Derf - yes, I've done the same or similar. My experience so far has shown that the numbers are all over the place and go up or down with the source and date of reporting. I have seen some of the numbers you and/or Bro mentioned and was only checking for confirmation. Thank you for your responses.
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