Global investing: Help clients see the long view
Financial advisors should tell clients to proceed with caution when news accounts trigger some to consider reducing the global stakes in their portfolios.
For instance, in June, Secretary of State John Kerry and Treasury Secretary Jacob Lew traveled to Beijing to discuss once again a long-awaited, not-yet-delivered bilateral investment treaty. The trip concluded with no more an optimistic outlook than a possible deal three years in the future.
The news out of China didn’t sway Mark Mobius, executive chairman of Templeton Emerging Markets Group in San Mateo, Calif., who directs the research team with 18 offices in emerging markets.
“Regarding China, I don't see any deviation from the fast growth the country has been experiencing. Actually, in U.S. dollar terms, now that the economy is growing at 7% the amount added to the economy is greater than when the country was growing at 10% because the economy is much larger,” Mobius wrote in an email.
“The waves of riots,” that the Wall Street Journal reported about in Vietnam, around the same time as Lew’s visit to China, also didn’t concern him.
According to the newspaper, “in the country's provinces…hundreds of factories owned by Chinese and other foreign companies were looted and torched.”
But Mobius wrote about Vietnam: “There are terrific bargains to be found in those markets. Some valuations have risen but for good reasons. The growth and development of many companies has been remarkable. The reward is much greater than the risk now.”
Even the Wall Street Journal, in its final paragraph, struck a note downplaying the drama, saying, “Most foreign firms say they are staying, due to the high cost of relocation and the government's assurance there wouldn't be a repeat.”
The takeaway for financial advisors is that they should help clients strike a balance between the bad news and the long view, said Timothy Atwill, who is a portfolio manager and managing director of investment strategy with Parametric Portfolio Solutions, which offers emerging markets investment funds and is a division of Boston-based Eaton Vance Investment Managers.
When they learn about developments in faraway economies where they have stakes, investors should “go back to strategic goals,” he says. They knew getting into those markets that they came with “massive volatility,” Atwill says. He recommends that advisors help clients diversify in far-flung economies “within asset classes.”
“You need to hold your nose sometimes. That comes with the expectations of growth,” Atwill says.
Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.