Diversify Globally To Limit Risk
Diversification is often referred to as the only “free lunch” in investing because, when done properly, it allows investors to improve risk-adjusted returns. This principle applies not just to diversification across U.S. stocks, but to investing globally. The choice to purchase securities internationally helps mitigate the economic and political risks of investing in only a single country.
The Credit Suisse Global Investment Returns Yearbook 2015 provides us with another good reason for globally diversifying portfolios. It contains an article written by Elroy Dimson, Paul Marsh and Mike Staunton, titled “Industries: Their Rise and Fall.”
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