Fish and Chips.

Bill Parrott |
Categories
Financial Planning
retirement planning

While visiting London a few years ago I was excited to see Big Ben, Number 10 Downing Street, Tower of London, Westminster Abbey, and Buckingham Palace.   These historical places lived up to their pre-trip hype.  However, what I was really looking forward to was eating a big helping of fish and chips.  Fish and Chips originated in London around 1863 in Oldham, Lancashire.[1]

In a couple of days, the residents of Britain will go to the polls to vote on Brexit.  The vote will cause some market disruption and could be a bloody mess regardless of the outcome.   With the pending vote does it make sense to commit a portion of your account to international investments?  Yeah baby!

According to a recent report from Dimensional Fund Advisors international markets account for 48% of the global market valuation.  As an investor it wouldn’t be prudent to ignore half of the world when it comes to constructing your portfolio.  The U.K. accounts for 6.5% of the global market sandwiched between Japan at 8.4% and Canada at 3.3%.[2]

Let’s take a look at three Dimensional international mutual funds: DFA United Kingdom Small Company Fund, DFA International Portfolio and the DFA Emerging Markets Portfolio.

A $10,000 investment in the DFA United Kingdom Small Company Fund in March of 1986 is now worth $235,380.  The thirty-year average annual return for this fund has been 11%.[3]

A $10,000 investment in the DFA International Portfolio Fund in February of 1994 is now worth $34,499.[4]

A $10,000 investment in the DFA Emerging Markets Fund in April of 1994 is now worth $37,272.[5]

The key to long-term investment success is diversification.  A portfolio of large, small and international companies will allow you to take advantage of multiple markets.  As the saying goes, diversification is the only free lunch on Wall Street!

Cheerio!

Do you know what's remarkable? Is how much England looks in no way like Southern California."  Austin Powers.

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.  www.parrottwealth.com.

June 21, 2016

 

[1] Fish and Chips by Ellen Castelow, http://www.historic-uk.com/CultureUK/Fish-Chips/ accessed 6/21/16.

[2] Dimension Fund Advisors, Global Equity Markets dated May 2016.

[3] Morningstar Office Hypothetical Illustration Tool.

[4] Ibid.

[5] Ibid.