Too much global exposure can hurt your retirement
Renier van Zyl, CFA
Portfolio Manager: Efficient Private Clients
Have you ever tried to find the proverbial investment needle in a haystack? In a world with more than 41 000 exchange-listed companies, at a combined market value of more than USD 80 trillion, global investing decisions can feel like trying to find a needle in a haystack. How do you approach this vast listed landscape to preserve and grow wealth over long periods?
There are only about 310 listed companies in South Africa, and the number is shrinking every year. For this reason, it is increasingly important to diversify your portfolio with offshore investments. Offshore markets offer investors greater diversity, including access to long-term options that are not available in South Africa. These include the transition to cleaner energy, the need for cybersecurity, global infrastructure spending and the ongoing investment in automation. Diversification of this kind is what the United States economist and Nobel Prize laureate Harry Markowitz considered “the only free lunch” in investments ─ where the whole is greater than the sum of its parts.
It might seem like a simple matter to identify the handful of companies among the 41 000 that will shape our future, but statistics suggest otherwise. Over the past 30 years we have seen the largest percentage of equity market wealth created by just a select few stocks. To phrase this differently, almost all the global stock market wealth was generated by only 2,4% of companies. If you were not invested in these companies, you missed out on most of the growth the financial markets offered. This suggests that radical and exciting developments, even world-changing innovations, are not necessarily good long-term investments. It emphasises the importance of being able to find the needles in the haystack.
Why is it necessary to partner with the experts in global investing? We help you find those needles. Needles like Accenture, which has returned close to 71% on an annualised basis for investors over the last two decades. The company provides information technology services and consulting in areas such as life sciences, cloud computing and sustainability. With the world changing at a rapid pace and companies being forced to adopt a wide range of technologies (of which they often know very little), we expect Accenture’s expertise to stay in high demand for a long time.
This brings us back to the question of how we find the needles in this investment opportunity haystack? The answer is simple: Partner with the right specialists.
As important as it is to diversify offshore, it is also crucial to partner with a team that possesses the skills, resources and processes to preserve and consistently grow your wealth over the long term. If you do not have such a partner, speak to the Efficient Global Investing team. We are global investment specialists that provide holistic financial advice that can help you find the sharpest needles.
