One of my favorite pastimes is reading the newspapers. Before the days of the internet (yes, I am that old), I received two newspapers, daily, at my doorstep.
Times have obviously changed, and for the last 15 years or so, rather than subscribe to home delivery of a paper, I now read the papers on my tablet and/or phone. Unless I am completely outside of cell and Wi-Fi range, I try to spend at least 90 minutes daily reading the news.
I am a paid subscriber to two newspapers: one Canadian, The Globe and Mail, and the other American, The Wall Street Journal. In order to broaden my perspective, I also read Flipboard news and scan world news, business, and politics.
I feel I have a good understanding of North American politics, business, and news and a decent understanding of world affairs. Yet, despite all of my reading, I still suffer from a bias that negatively impacts my investment perspective.
So why am I telling you the above?
Because I read Canadian and American business, news, and politics, I “suffer” from a Canada and US country-specific bias, especially as it relates to my investments.
I have a very North American–centric portfolio. At this stage, 100% of the stocks that I own are North American, and almost all blue chip.
I spend time reviewing company annual reports, regulatory filings, income statements, and balance sheets. I use the app Seeking Alpha on my iPhone and read the news of the companies that I follow.
But again, it’s all North American news. And although North America represents over 30% of the worldwide markets, I’m missing out on the other 70%.
In the blog post I wrote a few weeks ago, How I Protect and Grow My Wealth With These 8 Simple to Understand Concepts, I wrote the following:
“I want diversified assets across multiple sectors, asset classes, and currencies. I don’t want all my assets in the Canadian or US dollar. If the CDN or USD crashes, for whatever reason, I don’t want all of my eggs to be in one currency basket, and overall, the portfolio should have some uncorrelated assets”.
Overcoming Country Bias in My Portfolio:
I’ve spent some time over the last few months studying foreign markets outside of my home market. I’ve done some reading on which companies are doing well in China, India, Europe, and Australia, how their economies are doing, and what stage these economies are at in their economic cycle.
I’m definitely not an expert though. What I do know is that I need to diversify my portfolio outside of North America, the other 70% of world markets.
Diversifying Internationally:
Over the last few months, I have been increasing my positions in international markets (markets outside North America) and have bought all of the ETFs listed below.
You will notice (ETFs listed below) I bought an Australia-based ETF. I have no plans of ever selling this particular ETF. In fact, I intend to hold this position for the next 25 years, and although I’m not completely sure how Australia is doing at any point, I am quite confident that long-term, Australia is going to do fine.
I also own positions in two different India-based ETFs: one large cap and one small cap. India has the seventh largest economy in the world, and from 2014 onwards, with the exception of 2017, India was the fastest growing economy in the world, surpassing even China.
By buying international ETFs, I am able to participate in markets outside of North America without really studying those markets.
I can participate without any real effort.
At the moment, I have about 10% of my equity portfolio in international ETFs, and I am looking to increase that to about 20% over the next couple of years.
Some of the International ETFs I have in my portfolio:
Held in USD:
iShares International Select Dividend ETF – IDV
iShares MSCI India Small-Cap ETF – BATS:SMIN
iShares India 50 ETF – INDY
iShares MSCI Australia ETF – EWA
PowerShares International Corporate Bond Portfolio – PICB
Held in CDN:
iShares Edge MSCI Min Vol EAFE Index ETF – TSE:XMI
iShares Global Monthly High Dividend Fund – CDN Hedged TSE:CYH
BMO Europe High Dividend Covered Call ETF – TSE:ZWP
You will notice that I have some of my securities held in Canadian dollars and some in USD, and that’s because of what I wrote above:
“I don’t want all my assets in the Canadian or US dollar. If the CDN or USD crashes, for whatever reason, I don’t want all of my eggs to be in one currency basket.”
So by buying some of my international ETFs in USD, I am able to accomplish two goals at the same time … diversify outside of the CDN dollar and diversify outside of the North American markets.
I have eight different international positions: seven in the equity markets and one international bond fund. Each position serves a different purpose.
If you’re just getting started, you don’t need to purchase eight unique positions. You can probably get the necessary diversification with just two: an MSCI international ETF and an international bond ETF.
In the near future, I plan to open a global trading account that will allow me to hold, and settle, my stock trades in a few different country currencies, in particular, Australian dollar, Euro, Swiss franc, and the yen.
If you have 100% of your portfolio held in one currency or economy, and sh*t hits the fan in that country (think Venezuela or Argentina), then you might find yourself eating ramen noodles during your retirement. There is an easy way to diversify though, and that’s through ETFs that are non-North American–based. That’s an easy way to overcome country bias in your portfolio.
By the way, if you liked this post, you might also want to read this one: How I Protect and Grow My Wealth With These 8 Simple to Understand Concepts.
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Want to know more about me and read some of the other interesting small business growth, profit and wealth stories I’ve written.
Here’s one of the first articles I wrote: My Journey Post Business Sale as I Sail Into a New Harbour.
Are you a younger entrepreneur? Here’s another interesting article I wrote:
My Response to an 18-Year-Old Who Wants to Become a Millionaire by the Time He’s 30.
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