Backyard Bias: Why You Should Own International Stocks Too

The Chrysler 300 is assembled in Canada, the Ford Ranger is assembled in Thailand, and the monstrous Chevrolet Avalanche is assembled in Mexico. On the other hand, BMW assembles its crossover models in South Carolina, Honda assembles the Accord in Ohio, and Hyundai has plants in Georgia and Alabama. Why do I mention all of this? Because I think it’s important for us to realize that, regardless of how much we love and believe in our country, we live in a global economy. We all trade with one another for nearly everything–and it’s often the diversity of resources that makes companies so competitive.

As consumers, many of us like to support “American Made” products. We like the idea of keeping jobs in the U.S. and that’s certainly not a bad thing. For a stronger economy, we certainly do need good jobs. The nature of those jobs will change over time, but we’ll always need work. Supporting local businesses and trying to boost local economies can be a good thing. But the simple truth is that almost anything we buy will have touched the hands of someone from another country at some point throughout its production process. Living in a modern world exclusively with domestically sourced products certainly is possible, but the quality of life for most people will be quite a bit lower.

As investors, though, the issue isn’t really about whose jobs you’re trying to support. When you invest your money with a company, it’s all about quality. And there’s nothing inherent about the quality of American products. Both poor and exceptional products can be produced in America, as well as all around the world. When you invest in entities, you are betting on how they’re going to perform in the coming years. There are great companies in America and great companies abroad. If you want to be an intelligent investor, you will own stocks from both categories.

Last year, Chinese e-commerce giant Alibaba went public with the largest global IPO of all time–at $25 billion. According to Investopedia, Alibaba is followed by the Agricultural Bank of China and the Industrial and Commercial Bank of China, at $22 billion and $19 billion, respectively. Let that sink in: the top 3 Initial Public Offerings of all time are from Chinese companies. On the list of the Top 10 IPOs, there are two more Chinese companies, a Japanese company, and an Italian company. Only 3 American companies make the list: Visa at $17.9 billion, Facebook at $16 billion, and General Motors at $15.8 billion.

While this list is obviously just a small sampling of the stocks you should be looking at for your portfolio, it can be a real eye opener if you haven’t even considered investing in foreign stocks. Wealth is wealth–it knows no geographic or cultural divides. As you’re thinking about building a better future for yourself and your family through becoming a better investor, I would suggest broadening your horizons to the international playing field. Great companies are great companies; great stocks are great stocks; great portfolios are great portfolios–regardless of where they originate. If you need any help understanding how to better build your portfolio, feel free to reach out to us for a free consultation. We’ll do everything we can to help you build the future you’ve always dreamed.