Cam Goodwin was recently published in the Nashville Business Journal (www.bizjournals.com/nashville) for insight on navigating global investing. This column also appeared in a recent edition of our newsletter. If you are interested in reading these columns in your inbox, please contact us at firstname.lastname@example.org. Our promise is never to spam you with solicitation, but rather provide you with real-world insight on how to maximize your portfolio.
Incorporating global markets into an investment portfolio provides a broader platform for building wealth, but it also creates a degree of challenge. Consider the past five years, beginning with the market’s bottom in 2009: U.S. unemployment tops 10 percent; U.S. debt is downgraded; and the Fed tapers stimulus and reduces bond purchasing. Meanwhile, overseas you had the rippling debt scares in Europe, the Arab Spring and a Japanese economy that suffered two major catastrophes. And yet, despite the significance of these national and global events, the market is charging ahead at a record pace. So how does this translate to your investment portfolio, or better yet, how do you navigate a shifting global economy to maximize your investment strategy? Here are a few quick considerations. Maintain Perspective Throughout the course of history, virtually every economy in the world has suffered war, recession, depression and cultural challenges. And while some countries steer their way through difficult times more effectively than others, the global market always manages to correct itself. An effective investment adviser will understand how to allocate capital to take advantage of improving or emerging markets and underweight those at risk. Consider also that exploring beyond U.S. borders for investment opportunities is becoming increasingly important. Look at this statistic: The U.S. share of GDP in 1970 was 32 percent; in 2012 it was 22 percent. Some projections estimate it will be 15 percent by the year 2030. As an investor, the important thing to remember is that like historical events, an economy works in cycles. Being overly timid or impulsive about global investments can cause unnecessary short- and long-term risk. Understand your options The creation of Exchange Traded Funds (ETFs) has made it easier than ever to access areas of the market that were once available only to institutional investors. There is no longer a need to invest in expensive hedge funds with lock-ups and low liquidity. Through ETFs, individuals can instantly get exposure to commodities, emerging market stocks, real estate, timber, currencies and master limited partnerships. Investors can even obtain short exposure to areas they think will decrease in value. ETFs and mutual funds continue to allow investors new and improved access to asset classes and strategies that help managers attempt to enhance returns and manage portfolio risk. As a final note, the current situation with Russia and Ukraine is an excellent example of how mainstream media can cause undue influence on financial markets. While media has a valuable role to play in keeping the public informed, speculation by 24/7 talking heads creates more noise than value. Solid advisers and managers help clients develop their plan based upon their specific life situations, risk tolerance and their short- and long-term objectives. Good advisers also help clients be patient and enable their strategies to unfold and be successful. Too many times people make changes based upon near term events — domestic or international — that eventually decrease opportunities for increased wealth. Cam Goodwin is chief operating officer and managing partner of HawsGoodwin Financial.