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April 02, 2013 at 09:54 PM
Barbara Friedberg, founder and principal of Barbara Friedberg Personal Finance in Santa Clara, Calif., doesn’t necessarily believe that investing only in the world’s hottest and growing markets will make for better opportunity and greater returns. Nor does she fancy putting her money in markets that could be potential hot spots but that others haven’t yet ventured into as yet, or even limiting herself to those countries in the world that are safer, more stable plays.
When it comes to getting the best out of international investing, Friedberg’s one major rule of thumb is to be as broadly diversified as possible over the entire globe, with a bit of exposure to many different countries and a range of asset classes.
“You’re much better off doing that than saying ‘Okay, so now Brazil is hot, let me put 50% of my international exposure there,’ or ‘China is doing great, so let me tilt my portfolio that way,’” Friedberg said. “My general focus with international investing is that you want to hit the entire world, and that means developing and developed markets, small cap and large cap stocks and even some international bonds.”
Friedberg dedicates about 20% of her clients’ portfolios to international investments, and she divides this between developed and emerging markets. ETFs are her vehicle of choice, both for developed as well as emerging markets (she likes Vanguard’s VWO emerging markets ETF, for example). She also likes investment vehicles such as the GWX small-cap ETF, because she believes that small-cap companies have a greater chance to grow quickly than larger ones.
“Generally, I put a larger percentage of my international allocation in more stable markets and I have a proportionately smaller percentage invested in emerging markets, small caps and in REITs,” Friedberg said.
