www.latimes.com/business/la-fi-foreign28feb28,0,5874122.story
The inflow -- nearly three times the amount investors pumped into US stock funds -- underscored one of the biggest changes in Americans' attitudes about investing over the last year: Many people are far more interested in sending money abroad than keeping it home.
Some financial advisors say the unprecedented popularity of foreign shares with small investors is long overdue as Americans diversify their holdings after more than a decade in which they paid little attention to overseas markets. The appeal of foreign markets has risen as their returns have trounced US stocks' gains since 2002. "Obviously this is in large part a matter of people chasing performance," said Paul Merriman, head of Merriman Capital Management Inc. That is worrisome to some on Wall Street who recall the rush by small investors into technology stocks late in 1999 and early in 2000, at the zenith of the dot-com mania. As the shares collapsed later in 2000 and in 2001, the consequences were ruinous for some investors who were the last to buy in. The record January cash inflow to foreign stock funds, reported Monday by the Investment Company Institute, was almost twice December's level. Investors also turned more positive on US stock funds last month, although their enthusiasm was nowhere near what it was for foreign funds. Net cash inflows or outflows are new purchases minus sales by investors pulling money out. Foreign funds' investment returns have rewarded people who have taken the plunge over the last three years, and overseas markets mostly are beating the US market this year as well. The best returns were tallied by funds that own Latin American stocks. Through Friday, the average foreign fund was up 7% year to date, compared with a 46% gain for US funds. The continuing rallies in foreign markets have caused some Wall Street firms to warn against jumping in. Brokerage Morgan Stanley recently directed clients to pare their holdings of Japanese and emerging-market shares and buy US stocks instead. The firm said domestic stocks were better bargains than many foreign issues. Still, many financial advisors say comparisons between the tech-stock boom of the late 1990s and the current investor hunger for foreign stocks aren't valid. foreign stocks, by contrast, are a bet on the entire global economy outside the US As most investors know, growth in countries such as China and India has been a driving force for the world economy in this decade, benefiting the rest of Asia as well as Latin America, Europe and the US Mark Headley, president of Matthews International Capital Management Inc. in San Francisco, which manages a number of stock funds that focus on Asian securities, said he believed that Americans had woken up to the long-term prospects for economic growth in the rest of the world, after largely ignoring foreign markets in the 1990s.
Merriman said he continued to recommend that clients keep 50% of their stock portfolios in foreign funds and 50% in the US Besides the potential for cashing in on economic growth overseas, foreign securities offer a way for investors to diversify away from the dollar, in case the US currency suffers a further devaluation over time, he said. But the danger, Merriman said, was that investors were being lulled into believing that foreign stock markets only go up. What's more, he noted, the dollar's weakness since 2002 has helped boost overseas fund returns by making foreign shares worth more. If the dollar strengthened, it could cut into foreign returns.
|
http://csua.com/feed/