Is it Time to Give Up on International Investments?

Questions answered: Should I be investing internationally? What are the best strategies when it comes to investing around the world? What is the best approach for my individual situation? 

Are you ready to start focusing on the things that truly matter when it comes to your financial future?

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Key Points

• International Investing
  • Over the last 10 years (2010 – 2020), the S&P 500 averaged ~13.55%/year and a total return of ~256%.
    • If you invested $100,000, it grew to +$356,000.
  • MSCI EAFE Index tracks large and mid-sized companies over internationally developed markets as opposed to the S&P 500.
    • The MSCI EAFE Index averaged 5.5%/year and a total return of ~71%.
    • If you had invested $100,000, it grew by $70,800 of growth (as opposed to $250k of growth invested in the S&P 500 over the same time period). 
  • If we knew the next ten years would perform the same way as the previous ten years, I would tell you to not change a thing. 
• Perspective
  • Let’s understand the historical perspective of investing as a whole to have perspective on how we should be invested.
    • The US represents ~57% of the global stock market.
      • The UK represents ~4% of the global stock market.
      • Canada represents 3% of the global stock market.
      • Germany represents 3% of the global stock market.
      • France represents 2% of the global stock market.
  • The US makes up a large portion of the global stock market as of the end of 2020 and it makes sense that this should drive the core of our portfolio.
  • The total size of all French public companies put together is $1.86 trillion dollars. 
    • Apple is worth $2.25 trillion dollars (more than all collective French companies put together). 
• Previously we looked at performance over the last 10 years (2010 – 2020).
  • What if we look at the 10 years prior (2000 – 2010)?
    • The total return of the S&P 500 was -9.1%.
  • As opposed to looking at 2010-2020, if you had invested $100,000 in 2000 into the S&P 500, you would have had ~$91,000 ten years later (2010).
  • Alternatively, the MSCI EAFE index averaged a total return of 17.5% over that same decade (2000 – 2010).
    • The International Value index had a total return of 49% over that same decade (2000 – 2010).
    • The International Small Cap index had a total return of 94% over that same decade (2000 – 2010).
    • The Emerging Markets Index had a total return of 154% over that same decade (2000 – 2010).
    • The Emerging Markets Value Index had a total return of 213% over that same decade (2000 – 2010).
  • If you were only in international investments or only in the S&P 500 there would be times of significant outperformance and significant underperformance. 
• Additional Consideration
  • When we invest in an international fund, that one fund may own 20+ different countries. 
    • There are 23 international developed markets and 27 international emerging markets you can invest in. 
  • International Developed Markets
    • Examples: Portugal, Switzerland, Denmark, Germany, France, Italy, Singapore
  • International Emerging Markets
    • Examples: Czech Republic, Chile, Hungary, Brazil, India, China, Poland, Turkey
• Over the last 20 years, the United States has never once been the top investment performer. 
  • The US is consistently performing well on average, but never the top investment performer. 
• Diversification
  • In retirement, it’s not the average return that you’re looking for.
    • While you’re working, you can afford a negative return like the S&P 500 generated from 2000 – 2010 because you have the time for your portfolio to recover, but you can’t afford this in retirement (on top of other required withdrawals). 
    • Do you have an investment that’s generating income for you to allow you to do the things that you care about?
  • Understand the benefits of diversification to create your ideal portfolio.

Timestamps

2:04 – We’re on YouTube!

5:21 – International Investing Overview

8:52 – Perspective

12:48 – Diversification Benefits

13:50 – Asset Allocation

16:54 – Relative Performance

17:30 – Emerging & Developed Markets

22:02 – Aligning Your Investments With Your Financial Goals

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