Diversification by Country

New Zealand is great country, but opportunities for investors don’t stop at the border. Building a globally diversified portfolio is a way of ensuring you’re not overly dependent on one market or economy.  The United States and New Zealand had two of the top performing share markets in the world last year, Russia was one of the worst and Australia was so-so. Which will it be in 2015? The answer is nobody really knows, because whilst there are plenty of opinions about relative economic strengths, the economy and share market performance do not necessary move in tandem.  

The table to the below provides a snapshot of countries that had the best and worst performances over the 5-years to December 2013.

The chart in the button below provides a review of developed market returns in much more detail over 19-years.  The second button below provides a link to a very good column by Larry Swedroe, about why being globally diversified makes so much sense.

Summer Investment Commentary

The link to the report below, contains two main articles. The first provides a snapshot of the news and economic events that dominated the headlines in 2014 along with a broad summary of the sources of investment returns throughout the year.   

The second article provides a reminder that investors have choices.  This is particularly relevant for investors putting together strategies related to future income needs (retirement spending, house purchase, etc).  In general, increased spending today means less funds will be available for spending in the future, and vice versa.  This article reminds us all that, by making small adjustments to our current and future behaviour, we can dramatically influence the investment objectives we may be striving to achieve.

Forecasts to ignore

At the start of a New Year, the media is full of forecasts about the likely path of the economy and markets for the coming 12 months.  Most of these 'investment outlooks' are marketing exercises. The actual outcome of the forecasts doesn't matter since few people recall them anyway. 

The famed US economist John Kenneth Galbraith once said that the only function of economic forecasting is to make astrology look respectable.  Yet people keep on trying.  The link below to an article by Barry Ritholtz revisits some of the (now) embarrassing forecasts made this time a year ago.