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Why It’s Time to Buy International Stocks

Domestic equities are trading at fresh all-time highs, which makes it a smart time to hedge risk and diversify your portfolio by adding exposure to international stocks.

Sparklers and Champagne Glasses

Despite thousands of Baby Boomers reaching retirement age every day, demand for stocks remains remarkably strong.

Recent surveys have found that not only is investing in stocks still popular, but nearly half of Vanguard 401(k) investors are opting to actively manage their money. Of that group, those over the age of 55 had more than 70% of their portfolios invested in stocks.

Fidelity Investments reports that about four in 10 investors ages 65 to 69 hold about two-thirds or more of their portfolios in stocks. Primarily domestic stocks.

It shouldn’t be entirely surprising. After all, the S&P 500 has delivered annual returns over the last decade of just over 12% on average, with tech stocks leading the way.

The Cabot Explorer has also favored U.S. stocks but notes that there are signs that this may be changing as international stock markets from Europe to Asia demonstrate some momentum.

If you are looking to get ahead of the crowd, hedge risk, and seek less volatility, you might consider some international stocks to diversify your portfolio.

European stocks are cheaper than U.S. equities but overall produce lower revenue and profit growth in part due to tech being a smaller proportion of the market. As a result, the international stocks in the Stoxx Europe 600 are trading at a multi-decade discount to domestic names.

Why International Stocks?

Let’s face it - the average investor is just more comfortable investing in their home country than in companies based overseas. (It’s a phenomenon known as “home country bias.”)

But we need to realize that the world is filling in fast, powered by breakthroughs in technology & communications. Now, more than ever, you need a global perspective in seeking investment opportunities.

In particular, the rise of emerging markets is one of the most important trends in the world. These countries represent 85% of the world’s consumers, 40% of the world economy and generate more than 50% of world economic growth. But these markets only represent 12% of the world’s total market value.

I begin by researching and identifying the best growth trends which, like the wind behind a runner or the current behind a swimmer, makes success even more likely.

My philosophy in a nutshell is that there’s always a growth trend and bull market somewhere in the world.

Beyond Europe and emerging markets, there are countries such as Canada, Australia, and Japan – all full of world-class, dominating companies capturing growth and profits all around the world.

The Cabot Explorer follows global growth trends to find specific, actionable ideas in domestic and international stocks that have the potential to deliver big gains to subscribers.

I believe how much and where a company gets its revenue and profits is more important than where the company has its headquarters. After all, as great as it is, America still represents only 5% of the world’s population and 23% of the world’s GDP.

This is your opportunity. You must seize it.

Just last week I recommended a European stock trading at a discount at only two times sales. It has a nice dividend and a stable robust cash flow. What also caught my eye is that 78% of its sales are outside North America and almost 60% are from emerging markets.

Let’s get started. Join the Cabot Explorer.

Carl Delfeld is your guide to growth trends and bull markets around the world. His Cabot Explorer will show you the vast profit potential of investing in emerging economies as well as other world stock markets.