It isn’t out of choice that Paul Carroll’s travels around the globe inform his investment decisions.
A professional pilot for a major airline company, Carroll, CFP and founder of Efficient Wealth Management in Houston, takes to the skies once a month, flying across the ocean to such varied destinations as London, England, and Lagos, Nigeria. These visits, he says, help him greatly in shaping his views on the ways of the world and the many opportunities that international investing can bring.
“Flying is a great way to mix two jobs and make intelligent decisions,” Carroll says, “and as an investment advisor, being on the road this way lets me learn a whole lot about what’s going on overseas.”
But even if he weren’t a pilot, Carroll is the kind of advisor who believes that “you cannot avoid the world and succeed” in investing. His goal at Efficient Wealth Management is to build carefully designed asset allocation models for his clients that on the equity side of the fence, always have a 30% exposure to international markets.
“I base this on interesting longitudinal studies that have been done by Vanguard and others, studies that show that to optimize the equity portion of an investment portfolio, you should have at least that amount overseas,” he said.
Carroll’s approach makes even more sense in today’s rapidly changing world, where most domestic companies are actually global in nature. Capturing the upside of that means that Carroll splits his portfolios’ international segment into global large cap corporates; emerging markets and global real estate – the one sector that is a true indicator of the way in which the world has changed and continues to change.
“After World War II, there was a whole new level of affluence in the U.S. and a high dividend of productivity was paid out,” Carroll said. “But today, the U.S. and the rest of the Western world, is coming to the end of that demographic dividend. It is now hitting a whole swath of other countries in the world but they have something that we didn’t have: A guide on how to build an economy.”
But while his extensive travels have showed Carroll that there really are many investment opportunities all over the globe, he still chooses to place his trust in fund companies with proven track records in international investing, rather than getting down into the nitty-gritties of figuring out the potential of individual companies in different parts of the globe.
Carroll has great faith in Dimensional Fund Advisors, for example, because “they have passive funds that are not slavishly index-oriented, that have a value and that steer slightly away from the mega caps.”
Dimensional has been stellar when it comes to international and emerging markets stocks, Carroll says, as has Vanguard with its Total International Stock Index Fund. He also likes WidsomTree’s Emerging Markets Equity Income Fund. But Carroll’s international investing isn’t limited to equities. In his view, any portfolio should have a portion of its holdings allocated to international fixed income as well.
“If inflation becomes the problem that many fear it will, international holdings including bonds will do very well and bonds will serve as a good hedge,” he said. His vehicle of choice is the Templeton Global Bond Fund, which offers “very strong opportunities for overseas investing.”
Carroll founded Efficient Wealth Management in 2005 and currently serves around 75 families with assets approaching $80 million