Personal Wealth Management / Market Analysis

Ken Fisher on the Benefits of Investing Globally

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher believes a globally diversified investment strategy offers investors the chance to achieve long-term success with lower volatility relative to a domestically focused strategy.

According to Ken, many investors potentially miss good investment opportunities by only investing within their home countries. Thinking globally opens up your investing universe, and the additional diversification can help investors reduce the negative impact of country or industry specific factors. Given that U.S and foreign returns tend to be similar in the long term, Ken says that investors can add stability to their portfolio by investing domestically and outside their home country.

Transcript

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Ken Fisher: So, for a very long time I've been a big believer in investing globally, as opposed to just simply in your own country, whether it's America, the biggest and best economy in the world, or any other country. And a lot of people have a hard time with that. They say, “I don't know things overseas as well as I know them here in my homeland and why should I do that?” And that’s particularly true if you're in the blessedness of America.

But the fact is, there's more outside of any country than inside of it regardless of what country you're in or come from. Therefore, you have more opportunities. The countries don't all move with perfect correlation. Stock market correlations country-to-country are relatively positive but they don't move perfectly in lockstep. And so, you get more diversification effect by investing globally.

In the very long term, US and foreign returns tend to be pretty similar. You get long periods where one outperforms and long periods where the other outperforms. And if you think you're really good at timing that's fine. But if you don't, thinking globally gives you some of both and therefore diversification effect.

Finally, I want to say there's a lot of parsing that has to go into this, but sometimes you can see in a given country where one sector doing really well has dominated the returns of that country relative to not investing in that country over some period of time of a year or two or three.

For example, if we look at 2020, most of the effect of US leadership was in Growth versus Value. And most of that based on what makes up Growth in America is technology, primarily big technology because big technology is almost solely, not solely, but almost solely a US event.

But that flip flops when technology would do badly in the stock market for a period of time. In other years, there's actually a broad country array where these countries are doing better across the industry sectors and those doing worse, not just sectoral display. And then you actually benefit from the country effect of being in countries that are performing better perhaps when your country isn't.

So, more opportunities individually in stocks, in sectors. The opportunity to have more diversification and in fact a less volatile equity return compared to whatever country individually you come from because of that bigger, more diverse investing universe. Thank you for listening to me.

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A Series of disclosures appears on screen: “Investing is Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of fisher investment or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.

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