Fisher Investments Press: Own the World: Volatility Happens

Often, global investing naysayers cite foreign market volatility as a reason to stick to the US. They’re right about the volatility part, but Fisher Investments believes they’re dead wrong that sticking to the US is the answer. Fact is—stocks in individual foreign countries should be more volatile than the US. It’s not surprising or concerning. As mentioned repeatedly in the pages of Own the World, US economy and equity markets are the biggest and most diverse in the world. The diversification here means markets and economic conditions can be less volatile than those in smaller, less diversified countries. But the point of global investing isn’t to focus on one, two, or even a few foreign countries. Global investing should be just that—global. Fisher Investments feels that realizing the real benefits of global investing requires looking for opportunities in as many countries as feasible so issues affecting any single country shouldn’t be more concerning than issues affecting any narrow category of stocks in the US. And as explained previously, these days it’s possible to invest in most countries of any economic significance, especially developed countries with the most meaningful roles in global equity markets. So Fisher Investments thinks casting a wide net should be the goal of all global investors. Highly publicized blow-ups like those in Mexico in 1994, Southeast Asia in 1997, and Russia in 1998 raise caution flags. But US implosions have been similarly dramatic. Investors in US technology stocks at the beginning of the century didn’t feel much better than investors in Mexico in 1994. From top to bottom, the NASDAQ index fell almost 80 percent from 2000 to 2003.* That’s about the same as the drop in Mexican stocks in the early 1990s. From February 1994 to March 1995, Mexico’s Bolsa Index lost about 70 percent for US investors (including the declining value of the peso).** And losses suffered in US energy stocks from 1980 into 1983 were almost as bad as South Korean stocks from 1995 through 1997 during the Asian Financial Crisis.