Lately, there has been a significant amount of unrest – both political and economic – in the world. Europe and the Middle East have monopolized the headlines for quite some time. Does this impact whether or not you should invest internationally?
International investing is by definition investing in companies that are headquartered outside the U.S. But, as things become more “global,” their revenue streams aren’t necessarily dominated by their home country. Take Nestle for instance, it is headquartered in Switzerland, but a most of its revenues come from outside Switzerland.
International investment managers (or mutual funds) are looking at companies – not countries. Depending on the manager, they may consider the macro political and economic conditions for a specific country as they relate to a specific company, but they are really focused on the company, its prospects for growth, its valuation, its balance sheet, etc.
Another thing to consider – and this is a broad generalization – most international mutual funds are well diversified and any exposure to a specific country where there might be some unrest is pretty limited. That exposure is further constrained by the structure of your overall portfolio – international investments play a part of a diversified portfolio and likely don’t make up a significant portion. Take that one step further and consider that all the unrest we have heard about so far is in the emerging markets. Most allocations to emerging markets are pretty small, which significantly limits the exposure to any one or two countries.
So in conclusion, while there is unrest around the world at this moment, there is no real reason to question your international investments. But, if you want to talk about your portfolio and your international exposure, please feel free to contact us.