In this discussion, financial experts Paula Pant, host of the Afford Anything podcast, and Jesse Cramer, from Personal Finance for Long-Term Investors, tackle the debate on international stocks and their recent underperformance. They weigh the importance of diversification and historical performance, while exploring alternative investment classes like real estate and collectibles. The conversation also dives into quirky currency trivia, including the mysteries of a fictional $3 coin, all wrapped in humor and camaraderie.
Despite recent underperformance, international stocks still play a crucial role in diversification and should not be hastily eliminated from portfolios.
The podcast highlights the complexities of investing in different asset classes, emphasizing the risks associated with non-traditional investments like collectibles and private equity.
Establishing a clear investment strategy based on personal financial goals is vital for navigating market fluctuations and making informed decisions.
Deep dives
The Dilemma of International Investing
Over the past decade, international funds have underperformed relative to U.S. returns, leading to discussions on whether to eliminate them from investment portfolios. The conversation emphasizes the importance of evaluating funds based not only on recent performance but also on their role in providing diversification. Investors like Nick Majuli acknowledge that international funds may yield lower long-term returns, yet they still hold potential value when considered as part of a diversified portfolio. A broad approach, encompassing different asset classes and geographical locations, is crucial for mitigating risks during market fluctuations.
Diversification Beyond Borders
A nuanced view of international investing reveals that many U.S. companies, such as Nike and Coca-Cola, have significant operations abroad. This creates a paradox where investors may gain international exposure through domestic stocks, albeit with differing risk profiles. Investors must recognize that multinational corporations face unique challenges when operating overseas, including taxation and adherence to foreign regulations. Thus, while domestic investments can provide international exposure, they may not fully replicate the benefits of investing in dedicated international funds.
Risk Management and Investment Expectations
Discussion surrounding various asset classes highlights the difficulty of effectively managing risk. The contributors explore the concept of 'reversion to the mean,' where historical performance trends indicate that periods of outperformance are often followed by downturns. It's crucial for investors to resist the urge to make rapid changes based on short-term market movements and to adhere to a steadfast investment strategy. By maintaining a diversified portfolio and regularly rebalancing, investors can better position themselves for long-term success.
Identifying Non-Traditional Assets
Investors often face questions about which assets to include or exclude from their portfolios, particularly with non-traditional options like collectibles or private equity. There are inherent risks associated with investing in tangible assets like baseball cards or art, as their values can fluctuate wildly without guaranteed cash flow. The conversation reveals that many contributors avoid these assets due to a lack of understanding and the absence of predictable financial returns. Ultimately, investments need to align with one's financial goals and risk tolerance to be considered worthwhile.
Investment Strategies and Long-Term Planning
Establishing a clear investment strategy rooted in personal financial goals is essential for effective portfolio management. Emphasis is placed on identifying the desired outcomes from various investments, allowing for informed decision-making regarding each asset class's role. The discussion encourages investors to weigh the benefits of including different types of assets while considering their specific risk profiles and liquidity needs. By staying disciplined and focused on long-term objectives, investors can navigate market turbulence more effectively.
Is it time to break up with international stocks? They’ve been underperforming U.S. markets for years, so should we finally call it quits, or is there still hope for a global comeback? On today’s episode, Joe, OG, Paula Pant, and Jesse Cramer dig into the great international investing debate.
Are international funds a lost cause? The panel unpacks why they’ve lagged U.S. stocks and whether diversification still makes sense.
Beyond stocks: Exploring other asset classes—private equity, real estate, commodities, and collectibles (because who doesn’t want to invest in Beanie Babies and vintage lunchboxes?).
The $3 coin mystery: Yep, that was a thing. And yes, it’s as weird as it sounds.
Election results and wooden nickels: The intersection of money, history, and questionable currency choices.
Weekend plans and podcast highlights: Because investing is important, but so is having fun.
Of course, it wouldn’t be a Stacking Benjamins episode without some friendly debate, expert insights, and the occasional off-the-wall tangent. Tune in for a laid-back but insightful conversation on making smart investment decisions!