April 22, 2007 8:55 PM
Foreign Markets Provide Better Diversifaction Now
WSJ reports that the correlation between US market and other developed markets is becoming weaker, suggesting exposure in foreign markets can achieve better diversification now.
From WSJ:
Textbook theory suggests that investing abroad helps to diversify a portfolio because overseas stocks are influenced, at least in part, by local economic conditions and interest rates. Therefore, they shouldn't necessarily move the same way as U.S. stocks.
Correlation is measured on a scale of 1 to minus 1. When markets are moving in perfect unison, they have a correlation of "1" and when they move in exact opposite directions, it is "minus 1." (At "0" there is no relationship.)
During the two-year period that ended in February, correlation between U.S. and other developed markets was 0.63, according to ING Asset Management. That is a big decline from 2003 to 2005, when they practically moved in lockstep, at 0.93. (The figures are based on monthly movements in the Standard & Poor's 500-stock index and the Morgan Stanley Capital International EAFE indexes.)
So far this year U.S. markets have held up well. But foreign markets are doing even better. The Dow Jones World Index, excluding the U.S., is up 8.5% this year in dollar terms, compared with 3.9% for the S&P 500.
04/22/07 | Vonage: IPO to Bankruptcy in One Year?
03/03/07 | Finance Market Commentary, The UK Flavor
02/13/07 | 10 Tips for Value Investors
02/09/07 | Managed-Futures Funds Available To Small Investors Soon
02/06/07 | What Is Mortgage REIT?
02/01/07 | Exxon Mobile Is Minting Money
01/29/07 | The China Stock Market Is Red Hot
12/14/06 | Common Misunderstandings of Stock Market
11/28/06 | Bank of America Surpassed Citigroup in Market Cap
11/26/06 | Is Anheuser-Busch (BUD) A Buy?
11/25/06 | How To Buy QQQQ Without Commission
11/16/06 | Kraft (KFT) Spin-Off At Altria (MO) Is Near
11/04/06 | Stock Holdings By Our Congressmen
11/03/06 | What Does A Democrats' Win Mean To Your Financial Life?
11/01/06 | Warren Buffett Loves Retailing
11/01/06 | Six Banks May Receive Triple-A Credit Rating
10/31/06 | The Cash Machine at Exxon
10/31/06 | Wisdom from Value Investing Legend Christopher Browne
10/28/06 | Invest With Margin Loan? Use It At Your Own Risk
10/27/06 | Basics of Option Trading
10/26/06 | What Is Buy-And-Hold?
10/25/06 | The Difference Between Full Service and Discount Brokerage
10/25/06 | What Is P/E Ratio?
10/25/06 | Profitting From Penny Storys
10/23/06 | Go, PPD, Go!
10/22/06 | Should Microsoft (MSFT) Buy Yahoo (YHOO)?
10/22/06 | The Priceless Heart Attack
10/21/06 | Berkshire Hathaway And Its $100,000 Stock
10/20/06 | The World's Biggest IPO: Industrial & Commercial Bank of China (ICBC)
10/17/06 | Bill Gates' Successful Drug Investment
10/14/06 | Is BofA's Free Trading Program A Good Deal?
10/11/06 | What Is A Unit Investment Trust (UIT)?
10/11/06 | Visa Is Contemplating IPO
10/11/06 | Google Docs & Spreadsheets: Word and Excel From Google
10/10/06 | Will Fed Continue To Hike Interest Rates?
10/10/06 | MSN Money: 50 Best Stocks In The World
10/10/06 | Big Tobacco Companies Spending Big To Fight State Taxes (RAI, MO)
10/10/06 | Stocks With Dividend Growth Potentials (GE, MSFT, NI)
10/10/06 | Silver Linings Of Housing Industry (DHI, PHM, CTX, LEN, KBH, MDC, MTH)
10/09/06 | Berkshire Hathaway (BRK) Adds Its USG Corporation (USG) Stake
10/09/06 | China's ICBC On Track To Complete The Largest IPO, Ever
10/08/06 | How To Select Your Broker?
10/08/06 | What Is Day Trading?
10/08/06 | How To Get Corporate Reports?
10/08/06 | How To Avoid Internet Investment Scams
10/08/06 | Major Advantages Of Options Trading
10/08/06 | Basics of Stock Option Trading
10/08/06 | What Is A Stock Split?
10/08/06 | What Is A Reverse Split?
10/08/06 | What Happens To A Company After Bankruptcy?
10/08/06 | Hedge Short Selling Losses By Call Options
10/08/06 | 40,000 Starbucks (SBUX) Stores?
10/06/06 | Google (GOOG) To Acquire YouTube?
10/06/06 | How Mid-Term Election Will Affect Drug Companies
10/06/06 | Berkshire Hathaway (BRK) Breaks $100,000
10/04/06 | Is Qualcomm (QCOM) A Buy?
10/03/06 | Stocks For The Long Run: General Electric (GE)
10/03/06 | Stocks For The Long Run: FPL Group (FPL)
10/03/06 | Stocks For The Long Run: Anadarko Petroleum (APC)
10/03/06 | Stocks For The Long Run: J.P. Morgan Chase (JPM)
10/03/06 | Stocks For The Long Run: Burlington Northern (BNI)
10/03/06 | Stocks For The Long Run: Procter & Gamble (PG)
10/03/06 | Stocks For The Long Run: Applied Materials (AMAT)
10/03/06 | How To Make A Fortune In The Stock Market?
10/03/06 | Stock 101: Market Order, Limit Order And Stop Order
10/03/06 | What Is Dow Worth Today?
10/03/06 | First Data Spins Off Western Union
10/03/06 | The Motley Fool To Measure Stock Pickers
09/30/06 | Bank of America: Interest Rate Play
09/27/06 | Investment Managers Thinks U.S. Stock Markets Undervalued
09/26/06 | Microsoft To Broadcast Concerts Online
09/25/06 | Judge Certifies Class-Action Lawsuit of "Light Cigarette" Smokers
09/19/06 | How To Pick A Stock Broker?
09/19/06 | Fortune 40: The Best Stocks To Buy Now
09/19/06 | How To Buy Stocks?
09/19/06 | Bottom-Fishing For Energy Stocks?
09/19/06 | Fantasy Investing: The Ugly Reality
09/15/06 | The Long Case for Pre-Paid Legal Services
09/14/06 | Full-Service Broker Or Discount Broker
09/12/06 | 14 Stocks for Retirement
09/11/06 | Just Purchased: ConocoPhillips (COP) @ $58.50