Friday, October 5, 2012

My Investments: International Index (SWISX)

The last time I wrote about my own personal investments, I mentioned using a TIPS fund to hedge against inflationary pressure.  Today, I want to focus on the stock side of the equation (see pie chart on the right), and explore some international options.

Let's just review a little about the efficient market theory.  What the theory boils down to is that for any given risk level, nothing will perform as well as the total market in the long run.  That said, we have to understand which market we are in.  This next investment takes advantage of developed nations' growth from around the world.  The investment is an International Index fund.

I'm a big fan of Schwab for all my brokerage needs, and I specifically invest in their SWISX International fund.  In order to invest in something like an index fund, you need to have a sort of humble attitude when it comes to investing.  You essentially acknowledge that you do not have the ability to accurately predict the value of a company in the future and any investment in that company would be a gamble.  Don't worry...I'm in the same boat.  I played around with stocks in the past and it got me nowhere, so now I diversify my risk through index funds.  Since I'm a Schwab client, trading any Schwab funds is free which is an added perk.

The top companies in the fund include: Nestle, HSBC, Vodafone, etc...  I know sometimes when I mention investing in international funds, people tend to think China or emerging markets.  Instead this fund holds mostly developed companies who have a track record of decent returns.  Also, the expense ratio is generally low at 0.19%, which means that you only have to pay 0.19% of your assets to the fund management per year.

The last question you might have is "why bother investing internationally in the first place"?  You see, the whole goal here with my above portfolio is to diversify risk not only through different asset classes, but also through location.  In the future, there may be a circumstance in which the US is stagnating and the world is growing....why would you want to miss out on that?  As an added bonus, investing in international stocks has allowed me to pay more attention to world news.

Schwab's indices might not be right for you, but a quick search for international index funds will reveal plenty of options for your choosing.  Try it out...your portfolio will thank you.

I also put the caveat that I am not a licensed financial adviser and any investment suggestions I make are purely my own put that in your pipe and smoke it!

Wonderful Moment of the Day: Harvested 52 heirloom tomatoes from the last of my crop.

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