Claire Corlett

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Ken Fisher on The Importance of Diversification and Investing Globally | Fisher Investments [2019]

Ken Fisher on The Importance of Diversification and Investing Globally | Fisher Investments [2019]


Almost always, and almost everywhere, people get this wrong. They tend to prefer to own stocks
from their own country. In America, the biggest and broadest
stock market in the world, most diverse,
but also in small countries. The fact is that when you think of
broad categories of equity, the very long returns–
30 year returns of them– tend to be almost identical,
if not identical, to other broad categories of equity, if
the categories are calculated correctly. There’s a lot of incorrect ways
to calculate equity returns. But calculated correctly,
in the long term they get real similar, because in the long term, as I wrote about
in my “Only Three Questions” book, shifts in supply seven, eight,
ten years from now, are much more important
in determining pricing than shifts in demand
and can overwhelm any change in demand. Demand fluctuates in the short term
based on human emotion. Supply can be increased or decreased
nearly infinitely to overwhelm any perception of superiority
in category. And so, if you look at U.S. vs. foreign, and you go back close to forever,
they go back and forth, back and forth, back and forth, of U.S. doing better than foreign
for a few years, foreign doing better than U.S.
for a few years. Right down the middle is
the totality of global, since the world is a little more than half
U.S. equities in money value. And what that means, is you really get a smoother ride
to that long term equity return if you don’t focus on your local
home country bias and instead invest globally,
diversify globally, aim at the world market. In some periods, you’ll do worse than
the American market, or if you’re French, the French market, or if you’re Japanese,
the Japanese market. And sometimes, for a long time. But in the end,
it comes back to being the same. And if you’re in one that underperformed
for a long time, global helps you. If you’re in one that outperforms
for a long time, it’s not too long before,
if you’re just in that country, you’re going to have a disappointing time. Think globally, invest globally. It really gets you to the equity return
in the long term in the smoothest path.

1 comment on “Ken Fisher on The Importance of Diversification and Investing Globally | Fisher Investments [2019]

  1. Lately I’ve been focused on domestic. US companies, large ones, derive a lot of earnings from abroad anyway, and the major foreign country economies are struggling with some issues that at 64 I don’t need to figure. While Trump is president and CEO of this country, it’s hard to beat the USA!

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