By now you probably know that the U.S. stock market sank some 38% in 2008. That's truly dismal, there's no arguing that. But looking through the Jan. 15 issue of The Economist magazine, I was curious to learn that there have been a lot of even worse performers among world stock markets.
The results left me with several impressions:
- For starters, it shows us, to some degree, the limits of diversifying. If you had spread your moolah over companies in several nations, you might well still have seen your holdings drop in worth by some 40% or more -- Japan is down 45% since the end of 2007, and Italy 51%. Of course, the opposite is true, too, depending on which countries you chose, as some fared much better than the U.S. Mexico has dropped only 31%, for example, whereas Chile is down just 17%. It's worth noting, also, that had you been even more diversified, with some of your holdings in bonds, T-bills, and maybe even gold, they may have offered a bit of an upside to you.
- The results also show that the developing world can vary quite a bit. The famous "BRIC" nations of Brazil, Russia, India, and China had a rather bad run and are down 41%, 67%, 54%, and 63%, respectively, since year's end 2007. But other developing nations fared differently, with Venezuela, for example, down only 8%.
A last thought that occurred to me is that with so many countries having seen their stock markets fall so much, there must surely be some terrific bargains out there, just as there are bargains here at home. Here are a couple of ideas:
- You can invest internationally via mutual funds. Matthews Pacific Tiger (MAPTX), for instance, sports a 10-year 12% average return and top holdings such as Taiwan Semiconductor (NYSE:TSM) and Infosys (NASDAQ:INFY).
- If you prefer to stay closer to home, opt for U.S. companies with massive overseas operations, such as ExxonMobil (NYSE:XOM), McDonald's (NYSE:MCD), and PepsiCo (NYSE:PEP).
Since so many economies are growing faster than our own, it makes sense to look abroad for a few holdings for your portfolio. That's what our team of analysts do for our Motley Fool Global Gains newsletter subscribers. According to my colleague Tim Hanson, this may be the safest time to buy foreign stocks.
