Podcast Center
Video Center
Webcasts
Resource Center
Events
October 22, 2013 at 09:08 PM
While he says his clients do have a U.S. bias, which he honors up to a point, David L. Blain of D.L. Blain & Co. Ltd. makes sure that the rest of the world is well represented in their investments.
Made up of about 90% ETFs but with “a couple of mutual funds” having been recently added to their portfolios, the investments Blain chooses for his clients give them the benefit of a global view. While exposures aren’t calculated strictly on their share of the world market, Blain says that portfolios are a little overweighted in the U.S. That’s a concession to his clients, whom he says “are generally more accustomed to seeing the portfolio move up and down like the U.S. does.”
That said, it’s not all that much of an overweight for domestic stocks. Blain said, “We invest in every region of the world, and we start off with the market capitalization of that particular area. For example … at the end of September, emerging markets were 10.67% of world stocks. The U.S. was 49.46%, and developed markets were 39.87%.”
Subtracting the U.S. from the world market total gives them their starting point, “then we decide how much to overweight or underweight.”
Currently U.S. stocks make up about 60% of client portfolios instead of that 49.46%. And that’s about the only concession he makes to clients who might otherwise go overboard in overweighting one country or another, or one stock or another—something he’s seen advisors do as well if they don’t consider the size of that country’s economy in relation to the rest of the world, and in particular to the U.S.
“Let’s take China, for example. People may want to overweight China, but it’s only 2% of the whole world’s stock market capitalization,” Blane said. If either an individual or an advisor overweights China heavily, they could be introducing a risk all out of proportion to the potential for return, he added.
