The Adventure in Global Investing
The new U.S. presidential administration promises to shake things up in many areas of the country’s business dealings. This appears to be particularly true in terms of its transactions with foreign countries.
President Donald Trump has expressed numerous thoughts that the United States needs to renegotiate its trade deals with most of its major trade partners. He has raised the threat of tariffs against imports while Republican legislators discuss taxing imports as part of a restricted federal tax plan.
All of the talk has put caution in the minds of investors who make international investing part of their portfolio plan.
But investing globally is a good way to diversify one’s portfolio, and many investors consider the rest of the world when they think about their investment options.
Spectrem’s new study of affluent American investors shows just where those investors place their bets. In Asset Allocation, Portfolios and Primary Providers, investors discuss their current investments in international and foreign mutual funds as well as their plans to invest directly in countries outside of the United States.
The study looks at investors in three different wealth segments, and among the wealthiest, 29 percent of Ultra High Net Worth investors with a net worth between $5 million and $25 million plan to begin investing or add to investments in Europe. The European Union could be undergoing some changes thanks to Brexit and other calls promoting nationalism, but Europe still seems like the safest place for American investors to consider outside investment products and services.
The percentage of UHNW investors looking at Europe is only 1 percent below the previous year’s 30 percent.
On average, less wealthy investors do less global investing. Among Millionaire investors with a net worth between $1 million and $5 million, 19 percent are looking at Europe as a place to extend their investments, and that is by far the highest percentage of all possible countries to invest in outside the U.S.
Advisors can discuss global investing with their more broad-minded investors, and might consider using Europe as a jumping off point since it seems to be the place more investors already are looking at.
Investing in the United Kingdom is also popular among affluent Americans, but it can be challenging considering the uncertain effects of Brexit. As the negotiations over Brexit continue, advisors must be aware of all of the possible outcomes and how it can affect the UK’s role in global finance.
At the end of 2016, 13 percent of UHNW investors and 9 percent of Millionaires were looking to invest or add to investments in the United Kingdom.
The other country that might offer significant growth but raises huge questions is China. Thirteen percent of UHNW investors and 10 percent of Millionaires want to invest in Chinese products and companies, but again, advisors must keep a trained eye on negotiations between China and the United States as President Trump discusses balancing imports, exports and currency values.
No such concerns exist over Canada, where 12 percent of UHNW investors and 9 percent of Millionaires have their eyes set on future investment.
Among UHNW investors, other countries attracting investment interest are Japan (9 percent), India (8 percent), Australia (7 percent), Korea (6 percent) and Brazil (6 percent).
Fifty-two percent of UHNW investors have no interest in investing outside the United States. More than 60 percent of Millionaires will forego that opportunity as well.
Top Takeaways for Advisors
There could be some new and exciting investment opportunities in global markets. Advisors have a great deal to stay current on but international opportunities require much study and research. However, investors who want to consider global investments will definitely be looking for professional advice because the markets will be transforming in the coming months.
*According to Spectrem research, there are currently 29.8 million households with $100,000 - $1 million in net worth (not including primary residence, NIPR). There are 9.1 Millionaire households ($1 million - $5 million net worth, NIPR), 1.21 million Ultra High Net Worth households ($5 million - $25 million net worth, NIPR) and 145,000 households with more than $25 million in net worth, NIPR.
©2017 Spectrem Group