Here’s Why I’m Investing In Russia, China, and Korea
So I gave my reasoning, in a previous post, for why I believe the US stock market will continue to do extremely well going forward:
Previous Post: Dow 50,000 Within 10 Years
But I like to hedge my bets by being globally diversified. It’s also one of the reasons why I did so well this year with my stock portfolio:
Previous Post: How I did it: 35% One-Year Return
And it’s also why I’m bullish on US equities, but even more bullish on equities overseas. Especially Emerging Markets.
US Stock Market
The US stock market is up 8.9% YTD (year to date).
CAPE: 28 / PE: 25.93 / PB: 3.1 / PS: 2.0
Chinese Stock Market
China is up 14.91% YTD!
CAPE: 15.4 / PE: 7.4 / PB: 0.9 / PS: 0.7
South Korean Stock Market
South Korea is up a whopping 27.41% YTD!
CAPE: 15.3 / PE: 12.9 / PB: 1.1 / PS: 0.7
Russian Stock Market
Russia is down 9.66% YTD!
CAPE: 4.9 / PE: 7.1 / PB: 0.8 / PS: 0.7
With a Cape Ratio of 28, Price to Earnings Ratio of 25.93, Price to Book of 3.1 and Price to Sales of 2, the US stock market is fundamentally overvalued.
Now again, this may sound like I’m reneging on my previous posts, but I’m not. I still believe, even though by the numbers the US is overvalued, the US will continue to do well going forward; because, there’s an inherent and intrinsic value that the US stock market provides that no other market in the world provides (i.e. relative stability, favorable laws, corporate governance, low corruption, capitalistic free market structure, innovation of US companies, etc).
But strictly going off of fundamental value, there are countries that are trading at huge discounts overseas. Some countries, like China and South Korea have already done very well so far this year (South Korea is up 27.41% so far this year!). But I believe there’s more room for growth strictly from a valuation standpoint.
So having said all of this, my strategy is to continue putting any additional contributions towards both the US and overseas markets, but I will continue to tilt heavily towards Emerging Markets and also partially in other Ex-US Developed Markets (i.e. Europe) due to sheer low valuations especially when compared to the US market (what can I say, I like getting a deal!).
What are your thoughts on overseas markets? Do you invest outside of the US? Other than regional allocations, do you tilt your portfolio towards a certain sector or space?
Market Watch: The US Stock Market is the World’s Most Expensive
Star Capital: Global Stock Market Valuation