Lessons from Australia: International Investing

In contrast, we in the United States seem to be more home centric.  Since almost half of the global stock market is located in the US, we have more domestic investment option, and our portfolios tend to reflect that.  We are also more likely to invest in stocks and bonds, whereas Australians, living in a country rich in natural resources, are more open to investing in tangible commodities such as real estate or mining companies that are extracting minerals from the earth.

Today, we are seeing a growing middle class market in other countries.  China and India, for example, have focused on raising living standards among the lower classes of their population.  With that comes a tremendous amount of buying power, which, in turn, is spurring economic growth and opening investment opportunities for us and for others. 

As a more mature economy, our US growth rate of 3-to-4 percent is considered good to above average, whereas 7-percent-plus is considered good to above average in these developing markets.  We believe this translates into huge potential for investment opportunities.

Much of the trading around the world is calculated in US dollars, and we are very comfortable with that standard.  When considering international investing, however, the currency exchange rate becomes an important factor.  In 2018, for instance, the exchange rate has worked against US investors, because the strong US dollar means that earnings in other currencies don’t translate favorably for our investments.  

In summary, my trip to Australia was extremely valuable.  I think anytime you can experience something first hand, you gain a better appreciation of it.  Our one-on-one talks with Australian money managers and advisors, and reviewing with them how they go about due diligence and evaluating investments were very enlightening. 

I’m also glad to say that these meetings reconfirmed how similar we are in many ways as we work through various processes to help our clients.