Lew Altfest of Altfest Personal Wealth Management has always been a proponent of international investing.
He understands why people have a hard time understanding why “you can have a risky international stock and you put it into a portfolio and it reduces risk.” But that doesn’t make it any less important to diversification.
Clients can still be spooked by recent world events, though. While occasionally a client or two is well enough informed to call and “say something like, ‘Isn’t Vietnam the place that’s getting the manufacturing that’s leaving a higher-cost China?’ and we’ll pay some attention to that because it shows some intelligence and knowledge,” the opposite can be true.
“In general,” Altfest said, “people see international as being risky,” especially since events in the recent past have been worrisome. “They’ll say, ‘Why are you fooling around with that? Just put all my money into domestic,’ and we’ll develop a hard-of-hearing approach. But if they’re very firm, or say so a second time, we’ll pay attention.” But at the same time, he said, his firm will try to make them “see that the U.S. is getting closer to a peak.
“Fewer people are resisting international now than would have a few years ago,” he added, because some see opportunities. “But [some will still] say, ‘Not right now,’” although virtually everyone has international elements in their portfolio. “They just see it as risky,” although many will listen to the need for an international component if they think it’s going to raise their return.
“It’s my experience,” Altfest said, “that portfolio managers themselves who obviously are familiar with risk and return put more stress on the return end, and sometimes that works and sometimes it doesn’t. So why should I castigate my clients when portfolio managers themselves aren’t using risk/return measures as they should?”
That said, Altfest mostly sticks with mutual funds and bond funds. “We’re not averse to using ETFs,” he said, “but they would have to have a specific reason why [we’d use them], or a specific ETF. International percentages are running at about a third of the equity allocation—which makes up about 65% of the portfolio—and “maybe 5–10% of the total bond exposure” for fixed income.