What do most globe-trotting, trend-setting investors have in common? Like the Warren Buffets and other big names of the modern era, these mavericks are unafraid to jump at new opportunities and evaluate them rigorously.
Ted Bauman is a great example of someone who’s staked his success on being discerning about wealth-building. He recently shared some ideas on how regular investors could leverage ETFs to establish footholds in foreign markets. His theories are making waves among those who want to strengthen their global investment outlooks.
Is ETF investing right for your portfolio? Here’s what to know.
Overcome Your Fear of Foreign Investments
Ted Bauman brings a unique perspective to the table as a thought leader who’s visited almost 90 countries and launched charitable housing organizations in 33. According to him, many investors labor under the delusion that the U.S. is the only worthwhile wealth-building market. For whatever reason, these asset-holders have convinced themselves that they need to plant firm roots in America and forget about investing elsewhere.
Putting Things Into Perspective
Along with Banyan Hill co-contributors like Jeff Yastine, Bauman argues that while the United States remains rich with potential investment opportunities, it’s far from the only place to grow your nest egg. He says some key points to ruminate on include that invest in foreign markets now for enhanced profits later.
- The U.S. dollar looks like it’s on track to fall against other big currencies, so it might be easier to invest in foreign markets now for enhanced profits later,
- The U.S. Federal Reserve is shying away from its previous trend of hiking interest rates, and this could render certain investments less lucrative or more volatile,
- Countries like China are boosting local economies with the creation of massive stimulus programs, and
- Brexit, which has long had investors running scared, seems like it’ll pack far less of a punch than anticipated.
There’s no universally accepted way to anticipate whether global markets will outperform their domestic counterparts. Still, it’d be woefully shortsighted to assume that none will outpace the U.S. From emerging tech firms to brands that you may not have heard of even though they’re household names elsewhere, the playing field is rich with targets that might make your portfolio a bit more rewarding.
Jumping the Hurdles
Of course, this doesn’t mean that investing in foreign locales is easy. Bauman notes that merely getting started can pose unique challenges for some portfolio owners, such as having to maintain an offshore brokerage account or use Swiss banks. Nonetheless, some opportunities stand out for the ease of access with which U.S. investors can participate.
Why Ted Bauman Thinks ETFs Matter
Exchange-traded funds, or ETFs, are forms of marketable securities, or financial instruments noted for their liquidity — With short maturities and relatively stable prices, these instruments can be transformed into cash on demand and at minimal loss.
Getting to Know ETFs
ETFs track stock indices, bonds, commodities and other asset pools. Unlike with mutual funds, however, ETF trading occurs on regular stock exchanges and lacks the costly fees associated with shared asset management. They also facilitate common hedging strategies, and this makes them a favorite of investors who prefer having total control.
A New Way to Spread Your Holdings Conveniently?
One of the most interesting things about ETFs is that they let your money cross international borders without forcing you to do the legwork normally involved in such a journey. Bauman says that numerous ETFs currently trading on the U.S. stock market already include foreign assets. He also covers many of these funds in detail in his Bauman Letter newsletter and Smart Money system.
So what does this market expert advise for those struggling to pick the right portfolio opportunities? Bauman cautions against rushing ahead without thoroughly informing yourself. Before selecting an ETF, for instance, you’ll need to choose a market that you want to invest in and pick a fund whose assets apply to that domain. Then, you’ll probably want to evaluate its performance to be sure that you’re not missing out on better opportunities.
Fortunately, Bauman also offers a few juicy insights on how to evaluate different funds as potential portfolio assets. Here are some key data points to study with each ETF:
- The yield, or the amount that the security earns over a given timeframe, is a convenient indicator of return potential. It’s commonly expressed as a simple growth percentage that compares the dividend gains to the ETF’s market value.
- The expense ratio is the percentage of the assets in the ETF that go toward maintaining it. Think of administrative fees, brokerage commissions and other investment incidentals.
- The four-week performance represents the price performance of the ETF over the last month. This figure is helpful for comparing funds to standard market indices, like the S&P 500.
What can an investor learn from these kinds of figures? As Bauman can attest to, a little bit of data goes quite far in the right hands. For instance, someone who compares yields instead of just looking at the specific stocks included in ETFs might be better at making a choice that’s free of personal bias. Analyzing expense ratios in the context of recent price performance data might reveal whether the fund manager is worthy of your trust. Even though ETFs are amazing investments, it’s critical to do your homework, and this means going over the data with a fine-toothed comb.
High-level ETF Investment Concepts
Bauman also says that his favorite ETFs share some common characteristics. For one thing, this guru’s top picks all invest in stock-market leaders with high dividend yields. They also incorporate assets from emerging and established markets, and this diversity may be a factor in their noteworthy stability. Since ETF funds typically include asset portfolios that evolve, Bauman says it’s critical to pick something with a good manager at the helm.
Moving Toward the Investment Future
Are ETFs the ultimate solution to all of your investment woes? They’re funds, not magical wish-granting beasts. They can, however, include unicorns, startups and nascent market sectors that ride economic waves and favorable government policies to strengthen your portfolio.
Like other investment opportunities, ETFs can include trading fees and commissions. They also aren’t immune to market fluctuations, and funds that track narrower domains and industries may see larger swings as economies suffer or succeed. ETFs that aren’t heavily traded may also sacrifice some of the liquidity that usually makes them so attractive — They’re harder to sell after you acquire them.
Such risks notwithstanding, ETFs remain popular among investment jet-setters with good reason. These funds make it simpler to get around many of the traditional barriers to international investing, so they’re ideal for those who want to experiment with new sources of growth. Experts like Ted Bauman aren’t giving up on ETFs anytime soon, and if you’re interested in building wealth sustainably, neither should you.
Ted Bauman has been a member of Banyan Hill Publishing since 2013, but his investment roots run much deeper. After spending years consulting and developing economies in post-apartheid South Africa, Asia and other emerging markets, he’s a big fan of spreading knowledge and sharing his immense wealth.