One of the most favoured sayings used by wise investors is: ‘Don’t put all your eggs in one basket’. It’s a reliable and prudent notion – and here are good reasons for it.
Australia’s gross domestic product (GDP) in 2017 was estimated to be around US $1.4 trillion dollars; a handsome number but tiny in world terms; in fact it placed us 13th in world rankings.
To see how we are positioned, take a peek at the chart: expressed in GDP, major economies are far larger and generally present investors with greater opportunities than investing solely in Australia.
Another reason to expand a portfolio beyond Australia is that our stock market is so highly concentrated: just 10 stocks account for over 50 per cent of its value!
These two factors: the comparative size of our economy together with our stock market’s concentration on relatively few stocks strongly suggest that diversifying a portfolio would be wise indeed.
This is particularly the case when one considers the types of international companies into which one may invest
Here’s how the Palmer team addresses its international share portfolio:
Start with the fact that the top five economies have a combined GDP some 30 times the size of Australia’s.
Palmer’s exclusive relative value (RVA) process uncovers prime opportunities in selected overseas markets.
Our current model international portfolio comprises just 22 securities – and all the companies are substantial in size.
We enhance our diversification strategy by scrutinising our SMA international share portfolio on a regular basis and change holdings in line with identified relative value. As always, we fortify our process with in-depth Morningstar research.
Over three years, to 1 February 2018, we have outperformed the MSCI All Country World Index benchmark by a full two per cent.
So, if diversification makes sense to you, and you would like exposure to some of the most successful companies on the planet, consider our JPS Global Leaders Portfolio.
Some of your eggs in overseas baskets may be a wise place for them to be.
Disclaimer General Advice Warning
This publication has been prepared by Joseph Palmer Sons (ABN 29 548 490 818) an Australian Financial Services Licensee (AFSL 247067). Whilst the information contained in this publication has been prepared with all reasonable care from sources, which Joseph Palmer Sons believes are reliable, no responsibility or liability is accepted by Joseph Palmer Sons for any errors or omissions or misstatements however caused. Any opinions, forecasts or recommendations reflects the judgment and assumptions of Joseph Palmer Sons as at the date of publication and may change without notice. Joseph Palmer Sons, their officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. This publication is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Any securities recommendation contained in this publication is unsolicited general information only. Joseph Palmer Sons are not aware that any recipient intends to rely on this publication and are not aware of the manner in which a recipient intends to use it. In preparing our information, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual recipient. Investors must obtain individual financial advice from their investment advisor to determine whether recommendations contained in this publication are appropriate to their personal investment objectives, financial situation or particular needs before acting on any such recommendations.