If you think U.S. stocks are 'safer' than those in foreign countries, you may
want to reconsider.
Research shows that the safest investment portfolio--one with the highest
potential return and the lowest risk--is likely to be heavier on international
stocks and lighter on U.S. stocks.
Yes, many international stock markets, especially in emerging markets such as
Russia and Brazil, have been in turmoil lately. And yes, over the past couple of
years, the U.S. stock market has been a great place to be. But short-term
performance is a poor basis for long-term investment. The long-term story
suggests something quite different.
I have lately been on a quest for the perfect 'all weather' investment
portfolio, one that needs no more than periodic rebalancing. I accepted that, in
addition to assets such as bonds and inflation-protected securities, a big part
of that portfolio should be invested in stocks. But then I asked myself: Which
stocks? Which markets?
I found myself reading research conducted separately by two investment managers,
Joachim Klement, chief investment officer at Wellershoff & Partners, an
investment consultancy in Zurich with $10 billion in funds under advisement, and
Mebane Faber, CIO at Cambria Investment Management in El Segundo, Calif., which
manages $335 million.
Segundo)投资管理公司Cambria Investment Management（管理资产规模3.35亿美元）的首席投资长梅班·费伯(Mebane
Both men looked at the performance of more than 30 different stock markets
around the world over long periods.
Among their findings: First, no stock market provided the best return in all
periods. On the contrary, the markets of different countries and different
regions tended to fare better at different times. (So, for example, Japan did
better in the 1980s, the U.S. in the 1990s and emerging markets after 2000.)
Second, performance in the past has depended to a substantial degree on starting
valuations. You generally did best by investing in the stock markets that were
cheapest in relation to corporate fundamentals such as earnings and net
assets--and you generally did worst by investing in those markets which were
expensive on those measures.
Which markets are cheap, and which are expensive, has varied over time, and the
performance gaps have been substantial. Over five years or so, those who
invested in stock markets when they were very expensive were lucky to break even
after counting inflation. But those who invested in markets when they were very
cheap often racked up double-digit returns for many years.
This has enormous implications for investors. Far from being safe by sticking to
their home market, they would do better to focus on the least-expensive markets
and avoid the most expensive.
Taken to extremes, this would mean that today one would invest large amounts in
stock markets such as those of Russia, Turkey, Austria, Greece and Indonesia, as
they are inexpensive, and very little here in the U.S., which is comparatively
expensive on many measures.
It would be a bold investor who took such a gamble. (I wouldn't.) But there are
other, less alarming ways of taking advantage of this research.
A Balanced Approach
One can benefit simply by managing a balanced global portfolio and then
adjusting it roughly annually--selling a little of whatever has done best, and
buying a little of whatever has done worst--to maintain roughly equal
In the past, this strategy would have smoothed returns over time. For example,
U.S. investors would have benefited from the stronger performance of European
and Asian markets in the 1970s and 1980s, and of emerging markets after 2000.
A portfolio invested equally in the MSCI U.S., European and Pacific indexes, and
rebalanced once a year, would have saved U.S. investors from the calamitous
slump on Wall Street from 1969 through 1982. Balancing between the U.S.,
developed markets and emerging markets would have helped them after 2000.
On both occasions, those who stuck solely to U.S. stocks ended up losing
purchasing power over many years.
Alas, investing this way is a little harder than you might expect. Most 'global'
stock funds are heavily weighted toward stocks, and markets, with the highest
Today a typical global stock fund has about half its money in U.S. stocks and
less than 10% in emerging markets. Such funds invest more in a few giant
stocks--such as Apple, Google and Microsoft--than they do in most countries. And
they won't automatically rebalance in the way one would like. On the contrary,
as stock or market X keeps rising, it just becomes a bigger and bigger share of
What are the alternatives? One could randomly pick, say, 50 stocks from around
the world, and invest in them equally. Or one could use exchange-traded funds to
invest in five or 10 national markets with (one hopes) low correlations--from
Japan to the Middle East, Latin America to Europe. With online stock trades just
$8 apiece, these could be reasonably low-cost options.
Mr. Klement says for those who want to keep things simple, his firm often
recommends investing equal amounts in low-cost funds tracking five major
indexes: the S&P 500, London's FTSE 100 index, Europe's EuroStoxx 50,
Japan's Nikkei 225 and the MSCI Emerging Markets index.
100)，欧洲的欧元区斯托克50指数(EuroStoxx 50)，日本的日经225指数(Nikkei 225)，以及摩根士丹利资本国际新兴市场指数(MSCI
This portfolio, rebalanced periodically, 'beats a traditional portfolio by a
significant margin over time, ' he says.
For example, according to MSCI data, from Dec. 31, 1999, through Dec. 31, 2013,
this strategy would have produced investment gains of about 70%, compared with
less than 50% for U.S. stocks alone.