With the new year under way, pundits are issuing their forecasts of market returns for 2013 and beyond, while a number of big uncertainties loom on the horizon.
Will economic growth rise to its historical average? Will unemployment drop? Will the Eurozone get back on track? Will emerging economies decouple from the over-leveraged developed economies?
Meeting your goals requires adapting your asset-allocation strategy to counteract the changes in the financial and economic landscape.
Worldwide strategies better reflect today’s economic reality than the traditional division of assets into U.S. and non-U.S. categories.
A worldwide strategy will allow you to invest in the best companies regardless of where they are domiciled.
Many investors shy away from the international markets, particularly the emerging markets, out of fear or a lack of understanding the important role they can play in a portfolio. During the 1980s equity markets in developing countries were extremely small and illiquid and received relatively little interest from investors. However, over the next few decades, emerging equity markets experienced enormous growth and development.
The dramatic growth of emerging economies over the last decade has drawn the attention of investors worldwide. The International Monetary Fund recently projected a robust 6 percent growth rate of real GDP in emerging economies for 2013 compared with a modest projection of 2 percent for developed economies.
In parallel with the growth of emerging economies has been an exponential rise in the market value of emerging-markets equity offerings, resulting in a steady increase in emerging markets as a share of global equities.
Although emerging-market equities are commonly (and accurately) viewed as a source of high long-term growth, they also generate high income. The number of dividend-paying companies located outside the U.S. is even larger than the number in the U.S. In fact, emerging-market equities typically have higher dividend yields than U.S. equities.