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TALKING POINTS

Help Your Clients Understand the Importance of Global Investing

Global investing offers a world of opportunities for long-term investors.
 


What’s Wrong With Investing in Only U.S. Investments?

If you limit yourself to just U.S.-based companies, you’re essentially missing out on the investment opportunities of about three-quarters of the global economy and about half of the stock market’s value.

What Are the Potential Benefits of Investing Internationally?

There are times when overseas markets offer superior returns, and other times when they don’t do as well as those in the U.S. Mutual funds that invest solely outside the United States — or globally, with investments both inside and outside the U.S. — can offer shareholders a number of advantages.

World economies, markets and currencies often move in different cycles and rhythms. Combining U.S. stocks and bonds with investments in other countries can help provide a cushion against the effects of a down market in any one country. Mutual funds also give individual investors access to international markets that they couldn’t get on their own. A single fund can have holdings from dozens of countries around the world.

Diversifying your portfolio with international stocks can be a smart move for number of reasons:

  • You have the potential for higher rates of return abroad compared with that of domestic stocks
  • International stocks are an ever-expanding part of the investment world
  • You have the potential to lower the overall risk in a portfolio

What Are Some of the Opportunities in International Markets?

Middle-class ranks are estimated to swell from about 2.4 billion today to 4.2 billion by 20251. This represents a significant opportunity for multinational corporations and local business as the developing world surpasses the developed world when it comes to consumption growth.

For example, from 1990 to 2007, middle class households in Latin America increased from 56 million to 128 million due largely to a relatively robust economic expansion1. As these households make purchases aimed at improving their standard of living, the impact on the global economy could be significant.

Chinese consumers have become the world’s number one buyers of luxury goods. Globally, China’s affluent population accounts for 25% of all luxury spending. Growth of the luxury goods market has slowed recently along with China’s economy. Nevertheless, Chinese shoppers helped push luxury purchases to their third-straight year of double-digit growth in 2012.2

Through 2017, emerging or “pharmerging” markets are expected to account for about 70% of the projected increase in sales for the leading pharmaceutical companies on a global basis — an increase driven largely by rising income and continued lower cost for drugs.3

While beer consumption in developed countries is flat, it’s rapidly rising in developing countries. China, for example, accounts for a quarter of all beer consumption worldwide. In Asia, the beer market by volume is expected to grow nearly 4% annually through 2016, while in Latin America volume is expected to grow about 3.5% a year.4

How Can Investors Pursue These Opportunities?

Tremendous growth opportunities exist in emerging markets, but direct investment can be extremely volatile. Consider investments that provide exposure to emerging markets, which can help temper the volatility of investing directly.

What Are Some of the Risks of International Investing?

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in fund prospectuses. These risks may be heightened in connection with investments in developing countries.

Investing in developing markets may be subject to additional risks, such as significant currency and price fluctuations, political instability, differing securities regulations and periods of illiquidity, which are detailed in fund prospectuses. Investments in developing markets have been more volatile than investments in developed markets, reflecting the greater uncertainties of investing in less established economies. Individuals investing in developing markets should have a long-term perspective and be able to tolerate potentially sharp declines in the value of their investments.


This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

1

Sources: The New Global Middle Class: A Cross-Over from West to East, 2010, Homi Kharas and Geoffrey Gertz; The Emerging Middle Class in Developing Countries, 2010, Homi Kharas

2

Source: 2011 China Luxury Market Study, 2011, Bain & Company

3

Sources: Datamonitor and Datamonitor’s PharmaVitae Explorer, which contains sales of the industry’s leading pharmaceutical companies. Established markets represent the United States, the EU-5 (France, Germany, Italy, Spain and United Kingdom) and Japan. Figures shown are based on estimated data. The $646 billion sales figure for 2017 is a rounded number.

4

Source: Canadean