Tahoe-Truckee Market Beat: The interesting world of international investing
International exposure should be part of a well-diversified portfolio. Global stocks and bonds can be added to your investment mix to help spread risk.
Foreign stocks are broken down into two broad categories, developed and emerging markets. Broad based index mutual funds are available and investors can also buy individual stocks which are known as ADRs, American Depository Receipts.
One category of foreign stocks are referred to as the PIIGS. The PIIGS are a part of the Eurozone and consist of Portugal, Italy, Ireland, Greece and Spain. The PIIGS are struggling economically compared to the other members of the Eurozone.
I’m writing this on a flight from Athens to Philadelphia. I just finished re-visiting Italy and touring Greece for the first time. The tourism industry seems to be thriving in both places. The food was great, the historical sites were exceptional and there were crowds at all the main attractions.
The locals I spoke with in Greece were concerned about their future in the Eurozone and worried that another financial crisis was around the corner.
I had an old friend managing a gold mine in Greece for Eldorado Gold, and the Greek government refused to re-issue their mining permit in January of this year and would not give them a reason.
He told me that the mine has substantial ore deposits and that there are additional deposits in Greece not being mined. His opinion was that the Greek government was not motivated to develop their natural resources and they could add to their GDP by doing so.
People seemed to be worried that the Grexit issue will re-surface. Some of the cash controls that were put into place to prevent a run on the banks may also be having a negative long term effect on the economy. Consumption has dropped this year even though prices have been falling.
Long-term investors need to be prepared for periods of market volatility. News travels faster than ever and global events can have an impact on all stock markets. Proper diversification is very important to lower risk.
Over the next few years we are highly likely to see more news coming from Europe that causes concern. However, given the strength of the US dollar now is a good time to visit. The PIIG economies may be struggling somewhat, but they are still wonderful places to vacation.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.