The World is your lobster...
...in the words of Del boy. With electronic platforms and trading our client portfolios are all over the place – geographically speaking. I look at the good bits and the bad bits, especially in light of the current COVID 19 situation. In the last bit of my postscript I look at mitigating shortage.
Happy new (Chinese) year? Adieu Europe. Coronavirus.
If nothing else the current Coronavirus crisis shows the value of lots of eggs and baskets – diversity. In the old days only the very rich could consider investing in overseas markets via their bankers or stockbrokers as minimum investment amounts were high as were exchange costs; now it is possible to invest relatively small amounts via funds across many countries. As always there are pluses and minuses:
Diversity. Being able to invest across the globe means that investors can manage risk and an example of this now is accessing current Chinese markets – which seem to be recovering. To get rich quickly investments should be concentrated but this also can lead to getting poor quickly, being able to spread your money around can lower the risk to a level that suits you.
Legislation in many countries means that accountancy standards may not meet UK standards and this means that it can be difficult to properly assess investment opportunities. Another major factor is the risk effect of currency fluctuations; for example, if you have invested in an American Dollar denominated fund and the value of the Dollar falls against the Pound then you lose out, conversely if the Dollar rises against the Pound you win.
Flexibility is Key
The tools now available allow our clients’ money to be moved around World markets quickly and cheaply. If for example you have concerns over BREXIT then simply move some funds away from the UK. Our job is not to be patriotic; it is to look after our client’s money and being able to move easily is very helpful in this regard.
There are risks in overseas investment but in the main we believe that these risks are by far outweighed by the ability to diversify from our small island across markets in the whole World. This spreading of risk has worked well for us for over twenty years and most of our current client holdings have significant overseas exposure which topically has helped significantly in the recent Coronavirus outbreak.
For commentary on our take on the Coronavirus issue see the link on the landing page on our website. As always there may be some silver lining in terms of that some people might not now take quite so much for granted.
We have not stockpiled as a family as a result of which I am switching back from the electronic to the paper edition of the Financial Times.