#250 - Is Global Diversification Worth It?
On episode 250 of Retirement Answer Man we investigate the investment strategy of global diversification. With the U.S. stock market on a tear, is global diversification really worth it? In 2018 international investing has been a drag on our portfolios. As with everything, there are positives and negatives to investing internationally, but it is important to diversify your portfolio. David Stein, from the podcast Money for the Rest of Us, and I discussed the pros and cons of holding international stocks at FinCon recently, and I share a bit of our conversation with you all. Listen to our discussion and hear some interesting facts about longevity on this episode of Retirement Answer Man.
Longevity is here to stay
Longevity is a big issue if you are approaching retirement, because you will probably live longer than you think. This increase in longevity is important to consider when planning your retirement. Longevity has grown so much that the fastest growing population is that of centenarians! Between 2001 and 2015 deaths due to heart disease decreased while Alzheimer's deaths increased. As of now, the natural life expectancy seems to peak at 120 years old, but scientists are constantly looking for ways to increase it. The truth is we are getting healthier and staying productive for a longer time. Listen to the Hot Topic segment to find out what increasing longevity means for your retirement.
Pretirement is a great way to redefine retirement
Gone are the days when you can just stop working and do nothing. If you happen to live another 40 or so years after your retirement, then pretirement is a great way to gain time freedom. It combats your feeling of having little or no control over your income and your time. If you simply stop working, it can be much harder to jump back into the workforce if you ever need or want to. Pretirement helps to keep the mind active, which is an important way to combat Alzheimer’s disease. Learn how to redefine retirement by listening to this episode of Retirement Answer Man.
Why do we need global diversification in our portfolios?
The S&P 500 has been on a roll over the past ten years, while developed international markets have performed quite poorly. So if global markets are doing so badly, why should we even have them in our portfolio? There are positives and negatives to global diversification. There are quite a few quality companies that are traded overseas, like BMW, Shell and Volvo, which you may want to invest in. Limiting your portfolio to companies that are only traded in the U.S. limits the reach of your portfolio. While holding international equities can be more complicated and take more research, they can be a great way to bring balance to your portfolio. Discover the pros and cons of global diversification on this episode of Retirement Answer Man.
A conversation with David Stein on the pros and cons of global diversification
I recently chatted with David Stein from the Money for the Rest of Us podcast. We discussed whether global diversification is really worth it. The question of holding international investments is important to consider since the U.S. market has been outperforming global markets for over 10 years. David pointed out that if we want to hold a truly diverse portfolio then it should reflect the fact that over 40% of companies are held abroad. With a diverse portfolio it can always feel like you are missing out on something and that you have holdings which are dragging you down. How do you feel about your portfolio? Is it globally diverse?
OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN
HOT TOPIC SEGMENT
[3:42] Longevity is a reality
[8:33] Why is pretirement so important?
[12:10] What are the positives and negatives of holding international equities?
[16:07] Some data from the MSCI-EAFE index
[22:26] Why you still should hold international investments
[24:08] What does David Stein think of international diversification?
THE HAPPY LAB SEGMENT
[27:55] Longevity can lead to loneliness--so make some younger friends
TODAY’S SMART SPRINT SEGMENT
[29:10] Review your asset allocation and identify your exposure to global markets
Resources Mentioned In This Episode
David Stein Money for the Rest of Us
BOOK - The 100 Year Life by Andrew Scott
Roger’s YouTube Channel - Roger That
BOOK - Rock Retirement by Roger Whitney
3-video Series: 5 Minute Retirement Makeover
Roger’s Retirement Learning Center
The Retirement Answer Man Facebook Page