Alison's Money Rule

Global Investing without leaving North America

Posted November 28, 2011
Originally Published March 15, 2011

You can invest globally without leaving North America.

Perhaps you’d like to participate in the economic juggernaut of China. You might also be feeling the siren call of India and the hard charging South Korea. And what about Latin America which may be the next stock market big thing?

The problem investors face is wading through tens of thousands of stocks, ETFs and mutual funds in order to pick investments in those far flung places.

There is a better way. Take advantage of the strong loonie and don’t stray from the United States. Think of it as investing the way Arnold Swartzeneggar went on holiday in the movie Total Recall. He plugged into a machine which transported him around the galaxy. You can do more or less the same thing with your investments.

Here’s an interesting stat. Over 40 per cent of the revenue generated by companies in the S&P 500 Index comes from outside the United States.

According to RBC analyst Rajan Bansi, YUM, which operates the KFC brand in China gleans roughly one third of its revenues from that country alone.

Bansi also points out that McDonald’s, long a global presence, earns over 50 per cent of its revenues outside the United States and Coke clocks in at 70 per cent.

You don’t need to focus just on food and drink to get global exposure with U.S. companies. Colgate-Palmolive, that staple of conservative investors, generates over 50 per cent of its revenues in countries other than the USA.

An advantage to global investing through North America is that most of the large companies doing business around the globe also pay good dividends which have proven to be quite stable over time.

Here’s another benefit to investing globally this way. If you have concerns that the U.S. is still a long way from any kind of sustained recovery, companies with a large percentage of revenues generated elsewhere will be less vulnerable to any continued flatness or further decline in our southern neighbour’s fortunes.


Sidebar:

Projected 2011 Gross Domestic Product Growth Rates

U.S. 2.6%
India 8.3%
China 9.6%

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