Gil Armour of SagePoint Financial, Inc. has always felt that international investing needed to be part of a client’s portfolio. The first step is determining the percentage of stock appropriate for a client’s risk tolerance and age, but “once we get that chunk specified, I think roughly a third should be international and the rest U.S.”
Armour started as a financial advisor in 1994, and has been including that international flavor to client portfolios from the beginning. “If anything, I think it’s become more important than back then: that everyone should have exposure to all the good investment opportunities around the world. We don’t have the market cornered,” Armour said.
“It’s a combination of the risk and reward basis. With any foreign investment, there’s always a little more risk and unknown [factors] with currencies and political situations than we have in the U.S., but on the other hand, you can have a little more return if you add a foreign component to a portfolio,” he said.
That third portion of client equities devoted to international investing, he adds, could even be thought a bit conservative today: “Now, with the U.S. becoming a smaller percentage of the entire global equity picture, just because of emerging and developing economies around the world, you could argue that maybe we should have more like 40% or so.” Clients, he said, sometimes get a bit nervous if the allocation gets that high, believing “it’s riskier, which is true to some degree, but not always the case.”
Rather than picking individual stocks, Armour uses mutual funds “as the primary investment mechanism for most investors” because of their professional management and diversification. He adds, “And, from day one, since most mutual fund companies have not only U.S. but foreign in their families, I’ve always advocated picking from both as we develop our portfolios.” He also uses REITs and bond funds, which also provide a similar weighting of about a third in foreign investing components.