Don’t Forget to Invest in People Outside the United States
We’ve all heard the mantra “invest in yourself.” This is worthy advice, but at some point, you may also find yourself investing in other people. In fact, when you invest in stocks you are placing your hard-earned money in managers, employees, and even the customers who keep the companies in business.
Investors tend to favor investing in companies and people located within their own countries — a condition called home country bias. For Americans, this means being less diversified and missing opportunities of growth in far away lands. Furthermore, the majority of the world’s population is located outside of the United States. You can’t have a globally diversified portfolio if you ignore most of the world.
As the figure below from Nationwide shows, emerging markets and developing economies account for 82% of the global population, and 51% of economic activity. By 2019, these markets are expected to account for 54% of economic activity, compared to only 36% in 1994.
“Over the past 20 years, emerging market economies have growth rates in excess of those of developed economies, and based on IMF projections, this trend is expected to continue over the next five years,” explains a recent report from Nationwide. “Economic growth will be influenced by increases in population, a maturation of the middle class, and the continued transformation from rural to urban societies. As a result of these trends, consumer spending, infrastructure spending and residential construction will continue to expand.”
How will emerging markets affect your portfolio? Only you can answer that question. Chances are you currently have little exposure to these growing markets — and with the recent rumblings from Brazil to China, who can blame you? However, world populations are growing, and improving living conditions will bring opportunities to consumers and investors.
This is a sponsored post written by The Cheat Sheet on behalf of Nationwide®.
This information is general in nature. It is not intended as investment or economic advice, or a recommendation to buy or sell any security or adopt any investment strategy. Additionally, it does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. We encourage you to seek the advice of an investment professional who can tailor a financial plan to meet your specific needs.