International Diversification

  • 17 Jul
    How The Economic Machine Works & Why You Need To Prepare Your Portfolio For It

    How The Economic Machine Works & Why You Need To Prepare Your Portfolio For It

    • Productivity growth is the long-term key, make sure your portfolio follows it.
    • The global distribution of wealth is shifting very quickly.
    • Preparing your portfolio for what’s going to happen doesn’t even cost that much. On the contrary, it is even more profitable.

    Introduction

    Ray Dalio is famous for many things. One of them is his explanation of how the economic machine works where he describes how productivity growth, the long-term debt cycle, and the short-term debt cycle affect an economy.

    Today, I’ll briefly summarize his findings as they are reported in a 300-page document and, most importantly, see how Dalio’s economic philosophy can affect our investing strategies. More →

  • 14 Jul
    The Market Isn’t Excited About Brazil Yet. Here’s Why You Should Be.

    The Market Isn’t Excited About Brazil Yet. Here’s Why You Should Be.

    • The Brazilian economy is at a turning point. Inflation is down, exports are up, and growth is projected to be at 2%.
    • As currencies follow the economy, the stronger real will add a tailwind to your returns.
    • Don’t invest blindly in an ETF. Buying a few stocks will lower your risk and increase your returns.

    Introduction

    I have written about Brazil a few times here at Investiv Daily, and have primarily described the potential of the country. This article isn’t about potential because the situation has started to turn, so it’s time to really take advantage of the new trend. More →

  • 05 Jul
    Where The Growth Is: How To Invest In Emerging Markets

    Where The Growth Is: How To Invest In Emerging Markets

    • Emerging markets haven’t been the best investment in the last 10 years, but economic developments met expectations.
    • Long term analysis shows that emerging markets have just started to develop and the fundamentals are extremely cheap for the expected growth.
    • Each emerging market is different and one has to individually analyze political, currency, demographic, natural, and other risks in order to make proper investment decisions.

    Introduction

    There is a huge difference between short-term and long-term effects on financial markets.

    In the short term, anything can happen and sentiment is what mostly drives short term trends. If we take a look at the long-term chart for the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM), we can see how it’s still 24% below its 2007 peak. More →

  • 19 May
    What Three Chinese Companies Tell Us About The Risks You Need To Watch For In Emerging Markets

    What Three Chinese Companies Tell Us About The Risks You Need To Watch For In Emerging Markets

    • Proper due diligence is needed to separate low risk from high risk investments.
    • The fact is, nobody does their research anymore as ETFs and index funds have taken over the investment world.
    • I’ll describe a few Chinese investments that look amazing at first but can easily lead to a total loss.

    Introduction

    Yesterday we talked about how emerging markets are generally becoming attractive. Today we’ll discuss a few Chinese stocks that show some of the risks lying in such a market.

    As I see the S&P 500 climb to new highs, I understand that risk isn’t what investors think about, but my experience that spans a few market cycles keeps me focused on the risks while investing.

    By risk I don’t mean short term volatility coming from market sentiment. The S&P 500 hasn’t been volatile at all in the last 8 years as it has just gone up, but for every point that it goes up while corporate earnings remain flat, the risk investors are taking gets higher. More →

  • 18 May
    Emerging Markets Are Becoming More Attractive Day By Day

    Emerging Markets Are Becoming More Attractive Day By Day

    • Volatility is a given in emerging markets, but it’s also what creates amazing opportunities.
    • Economics, fundamentals, and currencies are all in favor of emerging markets.
    • China is just doing what the FED should have done 5 years ago: tighten after an expansion period.

    Introduction

    Emerging markets are a volatile beast, this is a given. However, the inherent volatility is mostly the result of our perception and not of actual structural changes in a country. As an example, last year a wonderful buying opportunity emerged in Cemig (NYSE: CIG), a Brazilian utility from the state of Minas Gerais. CIG’s stock price fell from double digits to $1.05 in just a few years. More →

  • 24 Apr
    Global Growth Is Finally Getting Some Traction, Be Sure Your Money Follows

    Global Growth Is Finally Getting Some Traction, Be Sure Your Money Follows

    • Macroeconomic trends are extremely important for your investing or trading returns.
    • The IMF’s World Economic Outlook is a great starting point for understanding where the risks and opportunities lie.
    • Long term trends show emerging markets and commodities are the place to be.

    Introduction

    Investing is both difficult and easy. It’s difficult if you try to guess what the market’s sentiment will be next week or next month, while it’s easy if you simply look at slow moving structural macroeconomic trends. These trends are like little forces that shape the market, similar to the gravitational forces among planets in our solar system. More →

  • 07 Apr
    Emerging Markets Are Still A Buy Even At Two-Year Highs

    Emerging Markets Are Still A Buy Even At Two-Year Highs

    • The International Monetary Fund revised economic growth projections for emerging markets and developing economies up to 4.5% for 2017 and 4.8% for 2018.
    • Not all emerging markets are cheap, therefore the best strategy is to invest in individual stocks.
    • Buying companies in growing economies at low price earnings ratios is what will make the difference for your portfolio in the next 10 years.

    Introduction

    Over the last year, you’ve probably read some of my articles where I’ve said that emerging markets are the best investment class as the demographics are better and stocks are much cheaper in relation to what the S&P 500 offers. As markets can’t overlook such positive characteristics for very long, emerging markets are up more than 18% in the last 12 months. More →

  • 30 Mar
    Looking For Dividend Yielders Abroad

    Looking For Dividend Yielders Abroad

    • The 1.92% dividend yield offered by the S&P 500 is ranked 32nd out of 39 countries.
    • It isn’t difficult to find blue chip companies globally that have dividend yields north of 4%.
    • Currency fluctuations should be a benefit if you respond in a smart way.

    Introduction

    Yesterday we discussed how high dividend yielders can easily turn into a trap because the dividends are unsustainable and depend on uncontrollable variables like commodity prices or interest rates.

    A global look will show us that there are good companies around the world that offer higher dividend yields for the same risk. These companies are found in countries with better demographics and higher economic growth, which should strengthen their local currencies and increase future dollar dividends. More →

  • 29 Mar
    Are High Dividend Yields Worth It?

    Are High Dividend Yields Worth It?

    • High dividend yielders are worth it if you know what you’re doing, i.e. you know the sector in detail and understand the macro environment. However in most cases, high yielders are traps with a high risk of permanent capital loss.
    • Less risk can be obtained by investing in dividend aristocrats. Most are fairly priced or overpriced, but some still pay nice dividends. The complete list is provided.
    • As always, I would look abroad for yield. The dollar is currently strong which makes such investments cheap. A currency reversal will give you higher yields in the future.

    Introduction

    Dividend investors have really enjoyed the last three decades as interest rates have been declining. Lower interest rates make stocks that pay stable dividends more attractive while also enabling management to use more leverage to increase those dividends.

    You can read more about what to expect from the dividend world here. However, low interest rates also push the price of stable dividend yielders into the sky making new investments less attractive. More →

  • 16 Mar
    The U.S. Market Is Irrationally Expensive – What Does The Rest Of The World Have To Offer?

    The U.S. Market Is Irrationally Expensive – What Does The Rest Of The World Have To Offer?

    • Global markets are much cheaper, but there’s an even better option.
    • It’s relatively easy to find stocks that have huge growth potential at cheap valuations. I’ll describe three sectors.
    • In the long term, the current trend of favoring the U.S. dollar and equities is going to shift to where the growth is. There’s no doubt about it, so be prepared.

    Introduction

    The U.S. equity market is like driving a luxury car. It’s reliable (low volatility or as some say, low risk), costs you a bit more to maintain (low dividends), it makes you look good (investing with the big boys), and it will eventually bring you to where you want to go.

    Investing in emerging markets is like driving a cheap car. Nobody considers your investments cool (looking for bargains in unknown areas like Russia, China, or India), the car won’t be as reliable (break down more often – think volatility), but it will be cheap to repair (high dividends), and eventually will also bring you to where you want to go. More →

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