by Dan Wiener and Jeff DeMaso | October 14, 2013 12:29 pm
The Senate and the House couldn’t come together and agree to keep the government open, preferring to play games with the country over the national budget and now the debt ceiling. Meanwhile, of course, the stock markets have been sliding.
However, because these seem to be politically generated losses vs. fundamental problems in the markets or economy, I’m completely sanguine.
We’ve seen this movie before. And the credits will begin to roll when cooler and wiser heads decide it’s time to free the country from this hostage situation and get on with the job of governing rather than arguing.
Some investors might wonder whether it makes sense to use international stocks to counterbalance the craziness here in the U.S. I’ve said it before, and I’ll say it again: It absolutely makes sense to have international exposure in your portfolio — regardless of the political fiasco du jour.
Foreign-based retailers and service providers have an advantage that multinational companies don’t: feet-on-the-ground expertise. And sometimes, large multinationals don’t actually have the advantage, as is the case with Google (GOOG) vs. China-based search engine Baidu (BIDU).
One of the best ways to harness those kinds of companies for added diversification in your portfolio is with one of my favorite funds for 2013, Vanguard International Growth (VWIGX). Coincidentally, the fund’s largest position is in Baidu, though overall the fund has the most exposure to European stocks (55.2%).
I always considered this fund’s former lead manager, Richard Foulkes, one of the best of the breed among international investors. Since he retired in 2005, Virginie Maisonneuve has taken over Foulkes’ portion of this roughly $20 billion portfolio.
The fund has three managers, with Baillie Gifford handling another 49% of assets and M&G Investment Management handling 11%. What’s encouraging about this trio is that the portfolio hasn’t exploded to hold hundreds of stocks — it currently has about 179, and the top 10 represent about 20% of assets.
With growth stocks presenting some decent opportunities, this Vanguard fund is a good option as a core foreign holding, particularly given its 20% stake in emerging markets.
Senior Editor Dan Wiener and Editor/Research Director Jeffrey DeMaso publish The Independent Adviser for Vanguard Investors, a monthly newsletter that keeps abreast of recent developments at Vanguard, and the annual FFSA Independent Guide to the Vanguard Funds.
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