In a survey of affluent U.S. investors, HSBC Securities reported a growing interest in overseas investing, and an opportunity for advisors to provide more information.
While 66% of those surveyed, which included investors with at least $250,000 in investable assets, say “investing in global markets is the future of investing,” and 79% are optimistic about the growth potential of these countries, 67% say they don’t know enough about these markets to allocate their investments there.
Eighty-two percent say emerging markets present a “great investment opportunity,” yet 41% said they were hesitant to invest. Almost a third of those surveyed still invest only in the United States.
The survey found interest in investment advice: Eight in 10 believe having an experienced advisor is necessary to successfully invest globally, but 38% are currently relying on themselves to make investment decisions.
A majority (68%) say investing in emerging markets is a viable consideration as a long-term equity investment and 34% say that learning about investing outside the U.S. is more important to them than it was two years ago.
Eduardo J. Ramos of Freedom Advisory, who advises affluent clients from his offices in Puerto Rico and Chicago, said, “China has grown from almost an insignificant market to a position that cannot be labeled as an emerging market any longer, and that comes with fiscal and social responsibility.”
He said that he sees opportunities in China, Germany and Japan.
“The strong interest in emerging markets is very encouraging and makes sense given ongoing news from those regions, the opportunities for diversification and potential long-term growth that these investments can deliver,” said Andrew Ireland, Head of Wealth Management and Premier, HSBC Securities (USA) Inc. “But, we’re still seeing a gap between interest and actual global investing, with almost a third of this investor class still having a domestic-only portfolio. This leaves out many of the world’s high growth, emerging economies: the markets that are expected to grow faster than most developed ones over the next few years. Education and understanding are essential and the financial industry must do more to help investors make the most of international growth opportunities.”
Weston Wellington, a vice president at Dimensional Fund Advisors, disagrees that fast growth is a reason to invest abroad.
“There is no reliable statistical relation between a country's GDP growth and its stock market return,” he said. But he concurs that overseas markets add diversification to a U.S. portfolio, lowering risk.
The investors surveyed do seem to want a sense of security when investing overseas. Eighty-eight percent want to know that a country is politically stable when considering an investment in its stocks, 75% want to see a strong infrastructure, 77% want a strong currency and 75% want high economic growth.
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