It’s A Big Wide World: Here’s Where Your Fellow Finimizers Are Investing Now.

It’s A Big Wide World: Here’s Where Your Fellow Finimizers Are Investing Now.
Stéphane Renevier, CFA

over 1 year ago3 mins

  • As Finimizers, you love global stocks. As JJ said, buying a global, diversified index is like a “hedge against ignorance”.

  • You’re big into emerging markets as well, with India and China topping the list of your favorite investment destinations.

  • But you’ve still got a soft spot for tech stocks: you’re keeping the Nasdaq close to your heart.

As Finimizers, you love global stocks. As JJ said, buying a global, diversified index is like a “hedge against ignorance”.

You’re big into emerging markets as well, with India and China topping the list of your favorite investment destinations.

But you’ve still got a soft spot for tech stocks: you’re keeping the Nasdaq close to your heart.

Mentioned in story

We’ve written a lot in the past week about the S&P 500 and whether there are other, more attractive alternatives to the big US index. But what could be better than asking you Finimizers for your views? So, we decided to do that too. Here are the three top suggestions you offered up…

Global stocks

In your community groups, by far the most popular suggestion lately was to invest in global stocks, and I was excited to see that. I explored that idea in depth this week, in this Insight. Interestingly, there was a lot of variation in which “flavor” this global exposure should be. Many of you – big-ups, Shay and Shane – like a more defensive strategy, opting for global stocks that have low volatility, and/or a high dividend yield. Some of you, like Jordan, tilt more toward stocks scoring highly on ESG factors. Others like Eirin believe that global small-caps stocks are poised to outperform the decade ahead.

My favorite comment was from JJ, who said that a world index is more diversified (compared to regional or country-specific ones), and hence could make a good “hedge against ignorance”. I couldn’t agree more: the more uncertain the future, the more important diversification becomes. If you want to invest in stocks, but don’t have a strong view as to which sector, region, or investment style will outperform, a global, diversified index might be your best bet.

Emerging market stocks

Many of you like emerging markets, not just for their potential for steeper growth, but also for their diversification benefit. The two most popular countries are India and China. Iain sees India becoming the world's third-largest economy and stock market before the end of the decade. And, as Luke highlighted, India’s huge, growing middle class means it could perform well even if other countries struggle. Asia (excluding Japan) and Africa, and a tilt toward ESG-compliant companies in those regions were also mentioned.

As I explained here, emerging markets could significantly outperform the S&P 500 if the global economy can cope with higher inflation without falling to pieces. Emerging markets stocks are cheaper, they’ve got a higher growth potential, and they’re likely to benefit from an environment where inflation stays higher for longer. They may also benefit from their currencies rising and the US dollar falling over the next few years. That being said, they’re likely to underperform if the global economy falls into a deep recession. If you’re thinking about China more specifically, you can find our views here or do an even deeper dive here.

Tech stocks

Many of you see the Nasdaq as a better alternative to the S&P 500 right now. It’s more heavily loaded up on tech companies, which Matteo and David see as having more growth potential over the next few years. Some, like Rafael, went a step further in the innovation spectrum, saying Cathie Wood’s ARK Innovation ETF (ticker: ARKK; expense ratio: 0.75%) is a good bet at these levels.

Now, I’m personally a bit more cautious on the tech sector, particularly the “disruptive” part of it – I fear that higher rates and inflation, and an environment that generally doesn’t favor speculation and FOMO might limit their upside. But I understand why some people make a case for investing in the bigger tech stocks. The sector’s heftier companies tend to be more profitable, see solid sales growth, and benefit from a more global exposure. As Paul, our in-house US stocks guru, explains, large US tech companies like Microsoft are just head and shoulders above the rest, and deserve a sizable premium. And if animal spirits return to markets (in my view, a big if), it’s not impossible to see the valuation of tech stocks rocketing up again.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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