Sunday, September 2, 2012

Investing Overseas

Heading into the worst month for stocks let us see if investing overseas had been a better alternative 2 and a half years ago when the market was still recovering. 

March 2010                                    August 2012              Gain/Loss

Nikkei 225  - $10,645.79                   $8839.91               (-$1805.88)
CAC 40      - $4013.97                       $3413.07               (-$600.90)
DAX           - $6048.30                      $6970.79                (+$922.49)
Singapore (^STI) - $2894.55              $3025.46               (+$130.91)
Bovespa      -  $70,045                       $57061.45              (-$12983.55)
All Ordinaries - $4889.80                  $4339.02                (-$550.78)
FTSE 100    - $5500.30                      $5,711.48               (+$211.18)
Composite - $11,866.90                     $11,949.26             (+$82.36)
FTSE/MIB - $23,545.02                     $15,100.48            (-$8444.54)
BSE 30      - $17558.73                      $17,429.56             (-$129.17)
Mexico IPC - $32,758.53                    $39,421.65            (+$6663.12)
Swiss Market - $6631.40                    $6,388.01               (-$243.39)
FTSE/JSE Africa - $27,895.10           $35,389.45             (+$7494.35)
Hang Seng   - $21,823.28                    $19,482.57             (-$2340.71)
S&P 500   - $1132.99                          $1,406.58               (+$273.59)

As the price table above shows investors would have been better off investing their money in the U.S. instead of trying to get profits overseas.  Taking into consideration the transaction costs of buying international stocks most major indexes would have delivered small if any gains at all.  In the last 2 years an investor most likely would have lost money or broken even overseas.  Only Germany and 2 other countries would have brought gains taking into consideration the added risk of investing internationally.  Perhaps a global mutual fund is a better alternative to international indexes if an investor feels confident and is knowledgeable hand picking individual international stocks can bring better returns as there are undervalued stocks in markets such as Russia. 

For stocks September is the cruelest month therefore enter or exit positions with caution.  September could bring QE3 yet the market may already have priced that in.  This Thursday investors will be keeping an eye on the European Central Bank meeting and for the details on their purchase of Spanish and Italian debt.  For this year the MSCI Emerging Markets Index has only gained about 3 percent.  Entering a position in the Dow right now would be risky, as noted in my previous Benzinga article "Is Now A Good Time To Buy Stocks?" the Dow has faced major resistance in the 13k range and surely enough as I warned it came back down from 13300 to 12,978.91 and closed Friday at 13090.  At this range an investor may be better off in the sideline waiting for technical signals.  The S&P and Dow Jones have shown strong gains this year and taking a look abroad can be a good strategy for the rest of 2012.

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