Investing without borders

3/20/2018

If you’ve been reluctant to go beyond the U.S. to invest in international stocks, this might be the time to jump in. 
 
That’s the message from Boston Private due diligence analysts Nicole Coombes and Paul Fortin, who research and recommend investments to include in client portfolios. “We are particularly bullish on international equities right now. They had a strong year in 2017, and we think that’s going to continue,” says Coombes. “That’s why we think it’s important to consider adding international equity funds to your portfolio today.” 
 
  2017 Returns
International Benchmarks
• MSCI Emerging Markets 
• MSCI EAFE (Europe, Asia, Far East) 
• MSCI ACWI ex US (all countries minus US)
 
37.28%
25.03%
27.19%
Domestic Benchmark
• S&P 500 

 
21.83%
Broad global growth in 2017 led to strong stock returns all over the world as reflected in the market indexes shown here. Source: FactSet, 3/6/18

 

But the long-term benefits of international investing are even more important says Coombes. 
 
“We also firmly believe in investing internationally over a full market cycle. At Boston Private, we think that international equities are an important component of any well-diversified portfolio, not just now, but always.” 
 

Leave your ‘comfort zone’ and invest internationally

While past performance is no guarantee of future results, the analysts point out four fundamental reasons to invest in international equities: 
 

1. Gain access to new investing opportunities.
You don’t want to miss out on the opportunities being fueled by emerging economies, privatization, and the elimination of trade barriers throughout the world. “There’s really wide breadth and depth to the economic expansion and people need to have international exposure to access it,” says Coombes.
Three reasons you should go global >

2. Benefit from attractive stock prices/lower valuations.
The international investing landscape continues to be very attractive in terms of stock prices, says Fortin. “When we look at 12-month forward price-to-earnings (P/E) ratios—which give us a good representation of stock valuations—we see that international stocks are considerably cheaper compared to domestic stocks.”
International stocks are relatively cheaper than U.S. >

3. Achieve better diversification and risk-adjusted returns.
“With a diversified international equity portfolio, when the U.S. markets aren’t as strong, you can have the benefit of exposure to international stocks, which may be stronger,” says Coombes. Diversifying your portfolio by investing in both international and domestic (U.S.) stocks also improves your portfolio’s risk-adjusted return, according to Fortin.
Adding international equities can improve overall return, reduce risk >

4. Eliminate ‘country bias’ and other barriers.
Holding on to a “buy American” bias can limit your potential for long-term investment growth. So can expecting U.S stock growth to continue unabated and viewing international investing as too complex. You can eliminate all three obstacles by including international equity funds in your investment portfolio.
Why ‘buy American’ shouldn’t apply to your investment portfolio >


After you invest overseas, stay the course

Once you decide to include international equities in your portfolio, remember the importance of sticking with your commitment. “International equities are a strategic asset allocation for any portfolio so it’s important to include them over the long term and not trade in and out of the asset class,” cautions Coombes. 
 
Plus, there’s really no reason to delay, she says. “As soon as you recognize how important international equities are to your potential investing success, you don’t want to miss the opportunity.” 
 

How Boston Private can help
 

To explore the opportunities and risks of increasing your portfolio’s allocation to international investments, talk with your Boston Private advisor.

To learn more about how Boston Private can help you create a customized investment portfolio, watch this quick video: How Boston Private Constructs Actively-Managed, Diversified Portfolios

 

Disclosures
 
The opinions expressed and information contained in this publication are given in good faith, may be subject to change without notice, and are as of the date issued. This publication discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice and does not represent a complete analysis of every material fact with respect to the economy, financial markets, interest rates, and any industry or sector mentioned in the publication. The graphs and charts presented were created for informational purpose only and use data sourced from FactSet. The accuracy and completeness of sourced data is believed to be reliable, but has not been independently verified.
 
There is no guarantee that Boston Private Wealth’s investment management services will achieve their objectives.
 
Investment products mentioned herein including stocks, bonds, and mutual funds may lose value and are not insured or guaranteed by Boston Private Wealth, Boston Private Bank & Trust Company or any of its affiliates, or by the Federal Deposit Insurance Corporation or any other government agency. Past performance is not indicative of future results, which may vary.
 
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.
 
International investing involves unique risks, including foreign taxation, foreign currency fluctuation risks, risks related with possible variances in financial standards and other risks associated with potential political, social and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries.
 
In addition, concentration of investments in a single region may result in greater volatility. Due diligence processes seek to diminish, but cannot eliminate risk, nor do they imply low risk. Asset allocation, diversification and rebalancing do not guarantee a profit or protect against a loss in declining markets.
 
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