Investors should consider investing outside North America.
That way, they’ll tap into global trends and diversify their portfolios, says George Dent, investment manager at Walter Scott & Partners Limited in Edinburgh, U.K. His firm manages the Renaissance International Equity Fund.
That’s key since it’s difficult to predict market trends, he adds. Still, he notes the technology and healthcare sectors seem to be gaining. For example, companies such as Google are benefiting from the shift to online advertising.
Also, there’s increasing demand for companies such as Novo Nordisk, the world’s largest supplier of insulin and related products. That’s because there’s increasing obesity around the world and, with that, a rise in diabetes.
If clients are interested in those types of sectors, says Dent, they need to look outside of Canada since our domestic market is primarily tied to energy, materials and financial stocks.
“By expanding south of the border,” he adds, “[they’ll] broaden [their] potential for diversification” since the U.S. market offers exposure to many technology, health care and consumer discretionary stocks.
By also investing overseas, people will be able to pick the best companies in the world, as opposed to the best companies in a single region or continent.
That’s especially helpful when North American markets rise and become overvalued, says Dent. People should avoid “being exposed [to] markets [that] become a little bit bubbly.”
Read: A tour of global markets
When choosing stocks, you need to look at their performance histories.
If you look at how companies have been run over the last five to 10 years, says Dent, you’ll likely see how they’ve behaved in tough environments. You’re looking for evidence that they’ll continue to be robust, high quality and growing businesses during all market cycles.
Then, you need to look at past and current valuations, he adds. When you do see a correction in the market, avoid highly priced stocks so there’s room for clients’ portfolios to grow, he adds.
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