Newspaper article THE JOURNAL RECORD

Global Turmoil Makes Investors Second-Guess Diversification

Newspaper article THE JOURNAL RECORD

Global Turmoil Makes Investors Second-Guess Diversification

Article excerpt

NEW YORK -- For those who've followed the conventional wisdom, dutifully allocating part of their would-be nest eggs to mutual funds with an international flavor, all this hysteria abroad merely pushes a nagging question to the fore: Why bother?

While most portfolio strategists would advise against adopting a "no place like home" approach to investing, the thought is tempting.

Despite all the hype about the unbridled potential of emerging markets, it's not as if the Pacific Rim was such a winning bet before all the tumult of the past month. In fact, through the end of September, mutual funds specializing in that region were down an average of 6 percent for the year, according to Lipper Analytical Services. Add in the recent debacle, and this year's loss becomes about 24 percent. Too short a time frame? For the past five years, a period of unprecedented success for U.S. stocks, funds focusing on the Pacific Rim are up only about 23 percent. Compare that with an average five-year return of 119 percent for funds that stick with U.S. companies. Stricken three years ago by a fiscal crisis similar to the one now rattling Asia, Latin America actually might have provided some reassurance if its impressive recovery hadn't proven so fragile in recent weeks. After posting an average five-year gain of 101 percent through Sept. 30, Latin American funds are now up just about 45 percent over the past five years. It all adds up to what seems a monumental betrayal by those Wall Street professionals -- the ones who made international funds a prominent choice on the menu of just about any 401(k) retirement plan -- who are supposedly looking out for the average person with modest savings. Apparently, at least some investors are growing frustrated. Even though mutual fund deposits exceeded withdrawals by $21 billion last month, those funds with an international theme suffered a net outflow of money. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.