The Wide World of Investing

By Robin M. Diedrich September 03, 2018

Image of the global world

Taking a global perspective when investing can sometimes feel like heading into unexplored territory. When world affairs shake investor confidence, a North American approach may seem like the best direction to take. However, these uncertain market conditions may provide an opportunity for adding value and diversification to your portfolio.

Applying the basic investment concept of “buy low, sell high,” the best time to buy stocks is often when the market outlook is uncertain and stock prices echo those concerns. We believe that some international stocks are reflecting these worries and are more attractively priced.

The U.S. stock market has performed well in the last several years and seems more fairly valued, comparing the market’s current price to its current earnings. For a more complete valuation picture, consider the earnings power of a market’s economy over a full business cycle as shown below - U.S. stocks are more in line with their historical averages, while international stocks look more attractive. Foreign, developed-market stocks look particularly attractive relative to U.S. stocks – presenting the largest value gap in some time.

International Stocks More Attractive - Cyclically Adjusted Price-to-Earnings Ratio (CAPE)

MKT-10968-C-The-Wide-World-of-Investing-chart

Past performance does not guarantee future results.

Source: Factset and Edward Jones calculations; 3/31/2018. Overseas developed-market stocks represented by MSCI EAFE Index. U.S. large-cap stocks represented by the S&P 500 Index. Emerging market stocks represented by the MSCI EM Index.

Investing internationally carries opportunities but also additional risks. Foreign countries have different demographics, growth outlooks, regulations and potential for economic instability. Furthermore, foreign stocks carry the risks of currency fluctuations and different accounting standards. When investing internationally, we recommend:

  • Professionally managed mutual funds are the best option, as they provide access to experienced professionals who have navigated through multiple business cycles.
  • Exchange-traded funds (ETFs) can also give broad exposure to international equity markets.
  • Individual international stocks should be used only as a complement to international mutual funds and ETFs.
  • For your domestic portfolio, some portion should be in Canada-based stocks that have a global business presence. These are not considered part of your international portfolio allocation because they tend to perform more like the Canadian stock market. U.S. stocks with a global presence and U.S.-traded American Depository Receipt (ADR) stocks are considered part of your international portfolio.

Your Edward Jones advisor can help you select the most appropriate international investments and the amount that's right for you.

Important information:

*Equity investments carry risk, including loss of principal.

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