S2 E28: International Investing- a drag or diversification strategy?

Blue Chip FM

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In this episode of Blue Chip NOW!, Daniel Dusina CFA®, Matt Mondoux CFA®, CMT, CFP®, and Jonathan Johnson CPA, CFP®, CMT explore the topic of international versus domestic stock investments. They discuss the concept of being underweight in international stocks, why this is their current strategy, and the various factors influencing this decision. The conversation spans the challenges of finding innovative companies abroad, the impact of multinational companies on domestic portfolios, and the role of benchmarks in investment strategies. They also touch on the historical performance of international markets compared to the U.S. and analyze potential shifts in market leadership.

Key Points From This Episode:

[00:00:00] Make sure investing internationally is actually worth your while.

[00:02:23] Explanation of what underweight means and how it is applied in their model.

[00:03:26] Comparison of U.S. and international market cap indices.

[00:04:02] Diversification strategies and the role of international stocks in a portfolio.

[00:05:28] The importance of multinational companies in providing international exposure.

[00:06:28] Revenue sources for domestic companies and their international exposure.

[00:08:29] The impact of U.S. innovation and technology on market performance.

[00:09:57] Challenges in finding high-growth companies in international markets.

[00:10:45] The sector composition of international indices and its implications.

[00:12:31] The diversification benefits of international stocks during market downturns.

[00:15:08] Exploring the conditions for increasing international exposure.

[00:17:09] The importance of innovation spreading to international markets.

[00:18:44] Challenges of attracting IPOs to international exchanges.

A message from the team:

We are underweight in international stocks but NOT international economies. Our model weight is 8%, while the average advisor had an allocation of 21% last year. We are also underweight relative to global indexes. Or are we?

When we choose which stocks to invest in, we like to ask the question, “Where is revenue actually coming from?” Our approach to international markets at Blue Chip Partners leverages exposure to large U.S.-based multinationals instead of mimicking a traditionally weighted international segment. We are exposed to international economies in what we believe to be a more fruitful way by investing in domestic companies that have international reach. It makes it easier to manage risk if you’re investing in a way that blends in exposure instead of picking a country.

The target date funds/portfolio is your classic set-it-and-forget-it global “diversification” strategy. Target date funds are NOT how we diversify here at Blue Chip. To repeat, we’re underweight in international stocks, but NOT international economies.

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