While most stock markets throughout the world and specific sectors in the US declined during 2008, the effects of diversification (and it’s benefits) can again be clearly shown so far in 2009.
By diversification, we mean more than just owning lots of different stocks. We feel it is important to own different baskets of stocks of different size companies, both in the US and throughout the world.
As of May 28, 2009,
- The S & P 500 Index (of US Large company stocks) was up just under 2% for the year,
- Many international markets are up between 10-20% and,
- Emerging markets are up over 30-40% for 2009
This is why we continually recommend broadly based, globally diversified portfolios. We think it is important that most investors have a significant weighting of their stock portfolio in investments outside of the US.
While many investors will review these figures sometime during 2009 and decide that now is the time to “jump into international and emerging markets,” we have maintained our weightings in these markets and may begin to take these gains as opportunities to sell some of the gains. That way we continue to try to “buy low and sell high.”