According to the National Association of Investors, just one in three Americans feels "comfortable" investing in foreign stocks or bonds.
And that, my friend, spells trouble
Honestly, if this kind of thinking continues, hardworking Americans like us could be headed for some woeful underperformance, if not disaster. Or so says "the smartest man in Europe."
The smartest who in what? That's what I said! But I swear to you, that really is what Byron Wein calls him. According to Wein, this mysterious gentleman earned that title by consistently identifying trends that would have major impacts on global financial markets.
Rumor has it this guy even called the collapse of communism and the dismantling of the Berlin Wall. And yes, he also warned us to start looking for stocks abroad long before the incredible recent bull market in foreign stocks.
You think I've lost my mind, don't you?
In my defense, Byron Wein is no hack. He spent years as a top equity analyst at Morgan Stanley. So, I'm somewhat inclined to believe him. As for his "mystery man" on the ground ... who cares? He does seem to be on to something.
Consider this: In 2005, stock markets in countries as diverse as Egypt, Russia, Turkey, South Korea, and Austria all gained 50% or more -- dwarfing U.S. stocks. Just about the same thing happened last year, too. I don't know about you, but I'm starting to sense a long-term trend.
In other words, when it comes to global investing, we haven't missed the boat. In fact, when Wein last crossed the Atlantic to consult with his clandestine friend, he found him even more adamant than ever that we start moving some of our investments overseas. For what it's worth, I'm taking him up on it.
"Global is definitely the way to go"
Not about to trust your financial future to some "mystery man"? Well, how about a Wharton professor? When Jeremy Siegel met with us here at Fool HQ last year, those were his exact words. More important, Siegel insists we should hold as much as 40% of our portfolios in foreign stocks.
Boy, I wish I'd listened. Granted, the $4 billion Janus Research (JAMRX) fund managed to ride some pretty solid top holdings, including Apple
In fact, this is better than you might think, given that U.S. must-owns, from Caterpillar
I haven't broken down the entire portfolio, but it seems safe to assume that the Janus fund's performance also wasn't hurt by the foreign stocks that now make up a full 20% of the fund's holdings. The fact of the matter is international stock funds flat-out thumped U.S. funds last year -- routinely delivering 20% gains and, in many cases, much more.
Born on the fourth of July
I assure you, I'm not some doomsayer prophesizing the collapse of the West and the rise of "Chindia." I have too much faith in America for that ... and too much invested in the U.S. markets!
But it's also a fact that more than half the capitalization of all public companies already resides overseas. And just last year, investors poured $53 million into foreign large-company funds, up 32% from the year before. And, yes, I'm one of them.
So far, I've settled for the iShares EAFE Index. Because I confess: I'm too chicken to invest overseas on my own. But now I have a mystery man on the ground, too -- a Bill Mann, to be specific. If you don't know Bill, he's a bit of globetrotter and an expert on international markets. I don't move a penny overseas without checking with Bill first.
Need help, too?
Fortunately, you don't have to cross the Atlantic for good advice, either. Bill recently launched an investment newsletter service called Motley Fool Global Gains to help American investors like us get invested overseas. Bill's a serious expert, so it's not cheap to join.
But you can try the service free for 30 days and pay nothing. Of course, you won't actually go broke if you don't invest overseas. But it could cost you some money. Why not take Bill up on his free trial offer and try Global Gains, instead? To learn more, click here.
This article was originally published on Jan. 17, 2007. It has been updated.
Fool contributor Paul Elliott owns shares of the iShares EAFE index, but no other company mentioned. Intel is a Motley Fool Inside Value pick. The Motley Fool has a disclosure policy.
