International Investing

Everyone who isn’t living under a rock knows that the “developing world” is absolutely booming.  People want to invest money in that and so they should.

Here’s the myth:  They figure buying local companies from that country must be the way to go.  Of course they don’t know much about these local companies so they hedge their bets by buying the country’s ETF (Exchange traded fund).  An even worse move is to buy a mutual fund that “specializes” in that country because of all the fees the fund managers take. People don’t realize that many of these companies are corrupt and the stock markets aren’t mature.  That’s not always the case but it often is.  It’s not the only way to get a piece of the action either.

Even if you only invest in American companies, a lot of your money is being invested overseas.  This is a good thing but it’s important to have a concept for how big those international markets are if you want to be able to judge for yourself which companies have their acts together and which ones don’t.  Some companies really see the big picture and some don’t.  It’s not all about P/E ratios.  You need to think ahead and I’m going to provide some numbers for you that will make this easier.

Everyone “knows” that the world is growing and changing but I feel the media, and therefor most people, still underestimate the significance.  In the past 90 days, India sold over 60 million cell phones.  In 2010, China’s year over year car sales went up over 45% to overtake the US as the world’s biggest car market in terms of number of cars sold.  Those are just astonishing numbers and they still have a ton of room to grow much bigger.  I’m living in Shanghai, and have been for 9 years now.  I can see with my very own eyes all the changes that are going on.