How and When To Achieve Foreign Exposure with Individual Stocks

Roger Nusbaum submits: I heard a segment with JJ Burns and Marc Pado about investing in China and China's impact on our markets. They both seemed to agree that retail investors should not own individual stocks.

That an investor should not own a stock from some country because they are an individual or retail investor strikes me as balderdash (Jim Rogers favorite word perhaps?). For a given investor a stock may or may not be appropriate, but a blanket statement like this seems incomplete.

I have touched on this a fair bit, but the risk taken by owning some stock with a heavy weight in the ETF for that country is does not make you a risk junkie if you own the correct proportion. If you allocate 7% to emerging markets, and split that 7% into three stocks from different countries that rely on different things that you have researched thoroughly -- you are not being crazy. The picks could turn out to be wrong, but this is far from gambling as the chance of fraud is statistically insignificant and as long as you have some sort of exit strategy.

I disclosed selling Sinopec (SNP) across the board about a week-and-a-half ago in a video post. At some point I will be back; I am not sure when. Part of being involved with a big, popular, white-hot theme is being prepared to sell when you have made a lot, and being willing to sit out for a year or maybe even longer.

Comments

[EverydayFinance]

In addition to balderdash, it's poppycock and obstreperous! Just kidding. Owning 3 or four international stocks from different regions is a nice diversification strategy, especially if they're in different sectors, high yield vs. growth, etc. Recently, I've purchased a Mexican homebuilder, an Australian high yield ETF, I've owned a Chinese ad agency for a while, and finally, a Russian beverage distributor. They've all performed spectacularly and I like them more than their requisite regional ETF. I've listed research and analysis on each of these and welcome comments at my blog. Dan