The Union Tribune today published in the business section an article written by Carolyn Geer of Wall Street Journal ( Diversify your Portfolio with International Stocks ) that suggests that investors put more of their money into overseas companies and funds.
She suggests putting 20-40% of our portfolio into international stocks, and she suggests some ETFs and Funds that she believes would be good.
I'm concerned about US bonds -- Interest rates are certain to rise as QE "tapers off" by the Fed. As rates go up, both short and long term bonds are also certain to drop in price. As rates go up, US investors will look at buying CDs at higher rates, rather than investing in stocks. Margin rates will go up, so speculative investors will have higher costs, and possibly will buy fewer stocks. Rising interest rates will also affect corporations investments in plant and equipment, and risk-taking new ventures. We also expect that rising interest rates could affect the housing industry. First time homebuyers will find higher rates, and higher payments, so may defer buying, or buy smaller homes. Builders will have to pay higher rates for construction loans.
So is Overseas investing going to protect us from that effect? It's possible that higher rates in US will attract capital from other countries and raise the rates there too? So foreign bonds will also fall in price. So many corporations are multi-national that if the business slows down in the US, it will likely affect businesses in other countries as well.
Recommended Funds:
Vanguard Total World ETF (VT) which tracks the FTSE Global All Cap Index
TRowe Price Global Allocation Fund (RPGX)
Also VEURX, EWA (Australia), PRASX (New Asia Fund), MAPTX (Pacific Tiger) and PRLAX (Latin America)
She suggests putting 20-40% of our portfolio into international stocks, and she suggests some ETFs and Funds that she believes would be good.
I'm concerned about US bonds -- Interest rates are certain to rise as QE "tapers off" by the Fed. As rates go up, both short and long term bonds are also certain to drop in price. As rates go up, US investors will look at buying CDs at higher rates, rather than investing in stocks. Margin rates will go up, so speculative investors will have higher costs, and possibly will buy fewer stocks. Rising interest rates will also affect corporations investments in plant and equipment, and risk-taking new ventures. We also expect that rising interest rates could affect the housing industry. First time homebuyers will find higher rates, and higher payments, so may defer buying, or buy smaller homes. Builders will have to pay higher rates for construction loans.
So is Overseas investing going to protect us from that effect? It's possible that higher rates in US will attract capital from other countries and raise the rates there too? So foreign bonds will also fall in price. So many corporations are multi-national that if the business slows down in the US, it will likely affect businesses in other countries as well.
Recommended Funds:
Vanguard Total World ETF (VT) which tracks the FTSE Global All Cap Index
TRowe Price Global Allocation Fund (RPGX)
Also VEURX, EWA (Australia), PRASX (New Asia Fund), MAPTX (Pacific Tiger) and PRLAX (Latin America)
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