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What should I do with my International Mutual funds’ exposure?

The US markets have been having a torrid time in the past one year – DJIA down by 7% and Nasdaq has dived by 29%; China has also corrected by 31%.

It is painful to see negative in our portfolios and hence, it is natural to ask this question.

I believe in constructing a portfolio of assets that has a good mix of different types that have 3 key characteristics:

  1. Given good returns in the long run

  2. Have great prospects.

  3. Asset classes in the portfolio are not closely correlated

How have the international markets performed in the last 10 years?

6 out of 10 times S&P 500 has been in the top half with negative returns in just 2 of 10 years!!

What about prospects?

Over the next 15 years, according to the World Bank report, the 3 largest economies will be:

1. China from US$ 17T to US$ 55T : 3x growth in 15 years

2. USA from US$ 23T to US$ 43T : 2x growth in 15 years

3. India from US$ 3T to 11T: 4x growth in 15 years

How are you going to benefit from this GDP growth?

US markets and Indian markets have a low correlation and also they provide a good currency hedge!

We can’t predict what will happen in the short term; if we could, we would all be Gazillionaires!! What we can do is to look at the past trends and future prospects and construct a portfolio that will help us meet our goals.

Ask yourself – if you use Apple phone, Amazon products and Google search and one day own a Tesla car, don’t you also want to benefit from their growth?

Equity Returns are NEVER a straight line, and it will be bumpy in short term…

but in the long term a good mixture of quality assets will be a winner.

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