Why You Should Be Investing Internationally
Many investors forget to put some international exposure into their portfolios -- and that's a huge mistake. Not only are domestic-focused investors lacking a key element of diversification, but they might also be missing out on some huge potential profits.
In this clip from The Motley Fool's Industry Focus: Healthcare podcast, healthcare analyst Kristine Harjes and Fool Funds portfolio manager Charly Travers discuss some of the unique challenges of international investing, and why they're worth facing in order to gain global exposure.
A full transcript follows the video.
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This podcast was recorded on Oct. 19, 2016.
Kristine Harjes: When you're thinking about building a portfolio, as an individual investor, how important is international exposure?Charly Travers: Obviously, we're little bit biased about that. It's less about the mathematics of your asset allocation. For us, it's more that we don't just want to be looking in our own backyard. We think there are great businesses everywhere around the world. It's certainly worth the time and effort to go find them. We have a lot of great companies here in America, but there are also a lot more out there as well.Harjes: Does looking outside of your own backyard present any sort of unique challenges?Travers: I think, in the United States, we are spoiled by a lot of things. We are spoiled by the sheer number of companies that are public and available to pick from. And we're spoiled by the transparency and the disclosure. We get quarterly earnings reports. Almost every company is going to do a conference call to talk about the results. In a lot of cases, you can get them up on the phone, if you felt like it. When you're investing overseas, it's an entirely different animal. A lot of companies report twice a year. A lot of them do not do conference calls unless they're big multinationals. The communications on their website may or may not be in English. If it's not in English, that's very difficult.
Then, corporate governance is not the same. We take it for granted here that companies have an independent board of directors that oversee what management is doing and that shareholders have a voice in changing things if so needed. That's usually not the case overseas. You'll find a lot of board of directors that are not independent by any stretch of the imagination. You will see companies where the founding family -- it's essentially a public, family-run business -- where they have a huge ownership stake and, basically, what they say goes. So, either you're on board or you're not. Then, in some cases, you're investing alongside the government, which also has a stake in the business. So, there's a lot of nuances and things you have to pay attention to. Management quality, making sure they're acting in the interests of all shareholders, is important for us regardless of where a company is, but we're especially mindful of it overseas.
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