Sometimes, you get hit on the backside by a rainbow.
I’ve been fortunate to have that experience more than is reasonable for one person.
I owe my parents an enormous debt of gratitude for the way they raised me, and the opportunities I was given as a kid, often at significant personal cost to them (and, as it happens, they were married 47 years ago, today. Dad’s no longer with us, unfortunately, making it a bittersweet day, but an important one).
In marriage, to steal a line from Peter FitzSimons, I’m the president of the Punching Above My Weight Club.
And my two young blokes are the lights of my life.
Frankly, anything else pales into insignificance, but my good luck didn’t stop there.
As I’ve written before, my investing journey properly started in 1998 when I happened across an article in the Sydney Morning Herald. Among the sources for the story was a US business with a strange name.
The company? The Motley Fool.
I looked up the site, and read everything they published every day (a task I’d struggle to complete these days, such is the voracious output).
I was introduced to long-term investing. To ignoring share price fluctuations and focussing on the actual businesses. To the value of quality. And growth.
Of course, I also started reading about a bloke called Warren Buffett — the world’s greatest investor, and chairman and CEO of investment company Berkshire Hathaway.
And in the years since?
The Motley Fool opened in Australia in 2011, and I started working for the company almost immediately.
I’m now our Australian chief investment officer and I run four of our investing services.
I get to work with some of the best people — professional investors and non-investors alike.
I’ve been to the Berkshire Hathaway annual meeting 4 times.
Yep, hit on the backside by a rainbow yet again.
There’s another aspect to my experience with The Motley Fool, though, that I only really appreciated recently.
Being a reader and member of The Motley Fool’s US business so early meant I learned about some of the great US companies. Businesses like the aforementioned Berkshire Hathaway. And Amazon. Google. Microsoft. WalMart. (I still own shares in the first three).
I mean, we all know about those companies, right? Especially the consumer-facing ones like Google that we use almost daily.
Except that most of us don’t really know the companies. We know the brands, sure. We use the products. But the companies?
Unless you were lucky enough to stumble on something like The Motley Fool years ago, or you’re an avid reader of The Wall Street Journal, you just don’t come across a lot of news about the businesses themselves.
Which is a huge shame. As I said, I was lucky enough to be honing my investment skills by reading a US website, which gave me a huge leg-up.
I opened a US brokerage account years ago. I bought Berkshire and Amazon (in particular) at much lower prices. Which is probably unsurprising, when you consider you have the world’s greatest investor and one of the world’s better businessmen in your corner, by owning shares in their companies.
If you’ve seen me on Sky News Business, Your Money or in the Fairfax/Nine press, you’ll know that encouraging Australians to invest overseas is something I’m passionate about.
I’ve suggested ETFs, direct investments, and buying ASX-listed companies with meaningful overseas earnings.
Why? Because I think you owe it to yourself to be diversified — in terms of currency, geography and industry. And because, more than that, I think there are some great overseas businesses — particularly US-listed ones — that are pretty cheap, relative to their future potential.
I mean, think about it — the ASX is only 2% of the world’s stock markets (measured by market capitalisation, or the value of all of the shares on the exchange added together).
What are the odds that all, most or even many of the world’s best investment ideas just happen to be in that tiny sliver of the globe’s stock exchanges?
It’d be like living in a Melbourne postcode and only buying investment properties in that postcode, without even considering alternative options. Are the investment prospects really best in Prahran, just because you happen to live there?
Or Eagle Farm?
You get the point.
I’m not saying you can’t do well buying an investment property in Kurnell, but what are the odds of that being the best place to invest, just because you live there?
That’s precisely what we do when we only invest in ASX-listed companies, though.
Personally, more than half of my investment portfolio (by value) is US-listed.
When my sister asked me for help investing a small amount for her kids, I suggested 50% be invested in a US ETF.
In short, I eat my own cooking
And it’s the sort of cooking I enjoy.
Is 50% right for you? Only you can answer that. But if you have at least a few years left until retirement, and/or you don’t need to completely cash out your shares on a set date, something more than, well, zero, is likely right for most people.
Isn’t it risky? Well, yes, I guess. You have share price risk and currency risk to consider. And those are risks, particularly if you have a particular short-term deadline.
But you know what else is risky? Having your income, your home, your portfolio and most of your Super (SMSF or otherwise) all linked to one currency, one economy, one stock market and one or two industries (financial stocks and miners make up more than half of the ASX!).
Wouldn’t you rather have at least some of your net worth invested in another currency? Another geography? Another industry (or three)?
After all, which industries do you think have the brightest futures? Australian banks or US-based tech? Australian miners or US-based consumer brands and online retailers?
I hope you spotted the trap, by the way. They’re false choices. The right answer, I reckon, is ‘both’.
Not in a Noah’s Ark ‘two of everything’ kinda way, but in a ‘Wouldn’t your portfolio be better off if you added some international exposure?’ kinda way.
Yes, diversification is worth it, in and of itself. But there are some wonderful companies worth adding to your portfolio, even if they didn’t add that benefit.
(Which means you’re getting two for the price of one — companies you’d want to own even if they were ASX-listed, plus the benefit that, well, they’re not.)
Don’t get me wrong. I haven’t fallen for the old ‘cultural cringe’ thing of assuming that the Yanks do everything better than we do. They don’t. We have a wonderful heritage of world-beating companies and products.
There are some great companies on the ASX. You should invest in them.
But if the future is going to be (in some cases, quite literally) created by the great innovators and disruptors…
…And if those companies are likely to be centred around technology…
…And if most of those companies will be born in, or adopted by, the United States (hello Atlassian)…
…And if, by dint of relative size, it was just statistically more likely that they’d be there anyway…
…And if, by doing so, you can benefit from at least three different sources of differentiation…
…Shouldn’t you be investing at least some of your portfolio outside Australia?
The answer, I hope, is clear.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Scott Phillips owns shares in Berkshire Hathaway, Amazon and Alphabet (Google's parent company). The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Amazon, and Microsoft. The Motley Fool Australia has recommended Alphabet (A shares) and Amazon. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.