Chris’s question: “Since we live in a global economy, shouldn’t we invest globally?”
I think part of the answer depends on your stomach for
foreign investments and the kind of foreign investments. For example, it was easy for a partnership
I'm in to decide to get a loan from
I rather like the idea of investing in US firms that do a
lot of business abroad. I used to work
for Boeing which is a great exporter and benefits from foreign growth. I don't know what Boeing's current policy is,
but when I was there, we would not denominate sales in foreign currency
values. This took the currency unknowns
out of the equation. I expect that any
I believe that most people don't think as deeply as your question implies. They just say a certain percentage of their funds should be in an overseas mutual fund and trust the mutual fund to make intelligent bets with their money.
I personally believe that the
It's also possible that
As long as people continue to spend and not save, the
I can't tell the future any better than anyone else. I don't believe in market timing. So, considering all of the above, I'm becoming more cautious. I think that the traditional 60% equity when working and 40% when retired is too high right now and that people ought to go back to the old rule where their percentage equity allocation is nearer 100 minus their age. This means a 55 year old would have 45% equity allocation and a 70 year old would have 30%. Part of that equity can be an international fund, but certainly not all of it. We’re not that global.
More important than all of the above is the need for people to save more. Historical national savings were 10% at a time when many people benefited from pensions as well as savings. Pensions are disappearing and the national savings rate is now in negative numbers. Saving 20% of their disposable income on the average may well be too little to recover that which has been lost, especially considering the demise of pensions.
Copyright © 2006 by Henry K. Hebeler. All rights reserved.