The Global Investment Imperative

It used to be that deploying capital outside of an investor’s home country was a nice diversification play.

Within the last 10 years, the buzz phrase “emerging markets” was has been thrown around regularly, and wise retail investment entities took note.

This was evidenced by the explosion of Emerging Markets funds; encouraging retail investors to allocate a modest percentage of their capital towards foreign opportunities. Yet this approach still emphasized maintaining the bulk of capital within the investor’s home country.

Why?

Unfortunately the answer can be found in largely in ignorance. And although decades ago this ignorance was acceptable, because the US market was arguably among the best to invest, global investment has become more of an imperative (where investors need to seriously consider putting the majority if their capital overseas) than just a diversification play.

Let’s use the US for an easy example.

Most US real estate investors think the US is the best place to invest; although NOI averages in some markets are only 7%. Yet, in Azerbaijan, the NOI can average 18%. This means that US investors not respecting the global investment imperative are doubling the time it takes for them to double their capital.

Now let’s talk about venture investing. Most US angel investors only look at deals from within their borders. Although this is fine, as there are new disruptive technologies hitting the market every year, this is also fishing in a scarce pond compared to other markets.

Why?

Because most other sectors in the US are mature and dominated by large players in the market. However, in other markets, simple products that have been in the US and are already at the top of the growth curve are just now being introduced. So while investors are fighting over who gets to invest in the handful of startups in the US, other investors are building Search Engine Optimization (SEO) service companies in Spain; where as of recently, many of the largest brands in Spain had never even heard of SEO. Yet, SEO has been a saturated market for years in the US.

So what makes the most sense? To be one of 100 hunters trying to find that one deer before the other 99 do; or to be the hunter that goes to a place where there might be just three other hunters or none?

This is one of the many advantages of a global investment strategy, and it’s exactly one of the many reasons why we only have three holdings in the US now – and are currently analyzing thirty different foreign markets.

It’s not to say that investors should pull completely out of the US, but it is to say that any promising US investment should be compared with several foreign opportunities.

Not only is global investment potentially more fun, challenging, and lucrative; but depending on the market; it could even be safer than the US. A great example of this is comparing the liquidity of US banks with those of Singapore.

Our Global Research Team has uncovered very interesting data about foreign markets.

Here’s a fun one. Recently the GRT put together a list of the top 25 cities in the world that (a) had the highest quality of living while (b) had a cost of living under $1,500 per month.

And guess what? Not one city from the US made that list. But Argentina (a place where many Americans refuse to even visit, let alone invest), had the most of any other country in the world.

Global investment is no longer a nice thing to do for a well-rounded portfolio. It’s now something that deserves serious consideration about whether or not it should be the core of one’s portfolio.

What’s great about this is the only thing limiting most investors from safer and better opportunities is no longer solid brick walls, razor wire, and foreign soldiers with guns; but just overcoming a little ignorance and fear.

Blessings.