MASSIVE GLOBAL DIVERSIFICATION
Not too long ago, large U.S. corporations like GE, IBM, Ford, Proctor and Gamble, etc. were some stocks to own for diversification purposes. Most investors were fearful and/or hesitant to invest in small U.S. or International companies due to their inherent risk. As we entered the ‘technology era’ in the 90’s, those fears began to slowly give way to the realization that future investor prosperity depended on leveraging new markets and technology companies.
Meantime, a paradigm shift has evolved that many investors don’t recognize the magnitude of…or the opportunity in. This new paradigm, the ‘new global economy’, interconnects every continent and country around the globe in multiple ways. Even though the U.S., Japan, and Europe have been the predominant industrial leaders in the past, this is NO longer the case. As Thomas Friedman writes in his best-seller, The World is Flat, the competitive playing field has been leveled due to many factors and has opened new markets of opportunity in China, India and emerging markets.
What is meant by massive global diversification? Simply put, owning ‘the world’ in an investor’s portfolio. This does not mean owning stock in 100 global companies or having 10 – 20% International exposure. We’re talking about having ownership in thousands of global companies through passively managed, low-cost and tax-efficient equity funds like ETF’s and/or Index Funds. These funds should consist of non-correlated asset classes to maximize returns while reducing an investor’s exposure to risk.
The Self Empowered Investor sees tremendous opportunity in a ‘flat world’ and the reason we educate DIY 2.0 Investors about the importance and benefits of owning the world through massive global diversification.
Next week’s discussion: Asset Classes. If you want to learn more, stay connected by following us on Facebook or Twitter @TheSEInvestor.