Rural Water - Quarter 1, 2016 - (Page 21)

DEPARTMENT: FINANCE Investing Without Borders a Three reasons why your portfolio should have a global perspective BY DARREN LAFEMINA, CFP®, PORTFOLIO CONSULTANT, SCHWAB PRIVATE CLIENT INVESTMENT ADVISORY, INC. At the supermarket, you may put Budweiser beer, Hellmann's mayonnaise or Ben & Jerry's ice cream in your cart. Chances are you don't care that an overseas company owns each of those brands. Most people buy a brand because they think it's the best, or the best value, regardless of where its parent company is headquartered. It may be worth taking the same approach to your investments. Because of globalization, even a portfolio invested only in U.S. stocks is likely to be influenced by global developments. Many U.S. stocks actually have direct exposure to international markets through foreign sales and operations. Likewise, a portfolio invested entirely in non-U.S. stocks will still typically have some indirect exposure to the United States. But just because you get a dash of international exposure from your domestic investments doesn't mean you should forgo allocating part of your portfolio to foreign assets. Rather, you should be thinking about your portfolio with a global point of view. Looking at the whole world gives you access to the widest selection of opportunities. Why limit yourself? "The world has increasingly become one global marketplace in which companies sell and operate," says Jeffrey Kleintop, Charles Schwab's Chief Global Investment Strategist. "This new reality means investors should think less about borders and more about adopting a global perspective." Here's why. 1. Sectors matter more than countries. When investing outside the United States, investors often make decisions first by country or region, rather than by sector. But buying the stock of a company in a certain country isn't the same as owning a share in that country. The sector in which a company operates can be much more important than its location. Our research has found that the stocks of big, global companies are much more likely to behave like other stocks in the same sector than like the stocks of companies that just happen to be from the same country. For example, you might assume that stocks in Europe's consumer discretionary sector have languished over the past few years, given the region's double-digit unemployment rate, recessions in some European countries and decreased lending to households. Yet Europe's consumer discretionary stocks, as measured by the MSCI Europe Consumer Discretionary Index, rose an annualized 21% in dollar terms between June 30, 2012, and June 30, 2015 - just shy of the 23% return of the MSCI USA Consumer Discretionary Sector Index during the same period. "Where a company is headquartered matters relatively little compared with its sector and other global macroeconomic RURAL WATER 21

Table of Contents for the Digital Edition of Rural Water - Quarter 1, 2016

Strategic Planning for Water Utilities
Planning for Drought
A Rally to Remember
The 17th Annual Great American Water Taste Test
USDA Rural Development Has Loans
Rural Water Association of Utah Launches Successful Training Program
Vermont Rural Water Association Continues Training; Plans More for 2016
From the President
Finance: Investing Without Borders
Emergency Management: Decontamination Strategy for the Water Sector
A Day in the Life of a Circuit Rider: Dell R. Harris, Kentucky Rural Water Association
Case Study: Bubble Diffusers
Regulatory Update
Throwing My Loop
Index to Advertisers/
From The CEO

Rural Water - Quarter 1, 2016