Global vs. Local: Mastering the Investment Balance

Hello investors!

Today, we're diving deep into a topic that has intrigued many investors: International vs. Domestic Investments: Weighing the Balance.

In todays letter

• Learning: Global vs. Local: Mastering the Investment Balance

• News insights

  • Qatar & Malaysia: A Financial Alliance Emerges

  • Blueprint of a Bulletproof Business

  • Innovate Through Storms: Thrive Amidst Uncertainty

• Key takeaways from video w/ Guy Spier (finding investments)

Global vs. Local: Mastering the Investment Balance

At its core, international investing refers to holding securities from markets outside one's own country, while domestic investing focuses on local markets. For instance, if you're based in the U.S., buying shares of Apple would be a domestic investment, but purchasing shares of Toyota would be an international one.

Historically, international investments have offered diversification benefits. According to a study by Vanguard, a portfolio with 40% international stocks and 60% domestic stocks had a 10-year annualized return of 5.6%, compared to a purely domestic portfolio's return of 5.2%. This slight edge is attributed to the diversification that international stocks bring, reducing volatility and potentially enhancing returns.

Case Study: Let's consider an investor, Jane, who started investing in 2010. She allocated $50,000 to domestic stocks and $50,000 to international stocks. By 2020, given the above returns, her domestic portfolio would have grown to approximately $82,300, while her international portfolio would have reached about $84,700. This simple example underscores the potential benefits of a diversified approach.

5 Key Points on Managing and Analyzing Domestic and International Investments:

1. Diversification: As Charlie Munger famously said, "It's not putting all your eggs in one basket." Spreading investments across domestic and international markets can reduce risk.

2. Currency Considerations: International investments expose you to currency fluctuations. It's essential to understand how currency movements can impact returns.

3. Geopolitical Risks: Different countries have varying political and economic landscapes. Staying informed about global events is crucial when investing internationally.

4. Tax Implications: International investments might have different tax treatments. It's wise to consult with a tax professional to understand potential liabilities.

5. Research and Due Diligence: Warren Buffett emphasizes the importance of understanding what you invest in. Whether domestic or international, thorough research is paramount.

While both domestic and international investments have their merits, the key lies in understanding your risk tolerance, investment goals, and the specific nuances of each market. As Warren Buffett once said, "Risk comes from not knowing what you're doing." So, equip yourself with knowledge, diversify wisely, and always stay informed.

News insights

Qatar & Malaysia: A Financial Alliance Emerges

Qatar's Financial Centre Regulatory Authority and stock exchange have formed a strategic partnership with the Malaysian Rating Corp. Berhad (MARC). This tripartite agreement aims to enhance growth and sustainability in financial markets, both domestically and internationally, by promoting knowledge exchange, uplifting Qatar’s bonds and sukuk market, and fostering best practices in capital markets.

[📝Full article]

Key takeaway

This partnership signifies Qatar's ambition to establish itself as a major financial hub in the Middle East with global influence. Investors should monitor developments in Qatar's financial markets closely, as this collaboration could lead to increased opportunities and standards in the region, but they should also conduct their own research before making investment decisions.

Blueprint of a Bulletproof Business

The article details the importance of a robust business model, highlighting its key elements such as vision, customer targets, messaging, and pricing. A strong business model not only defines a company's method of generating revenue but also guides its decisions on investments, management strategies, and potential growth opportunities.

[📝Full article]

Key takeaway

For investors, a company's business model serves as a blueprint for understanding its revenue generation methods, growth potential, and overall operational strategy. Before investing, they should critically evaluate these elements to gauge the company's adaptability to market changes, its value proposition, and its long-term sustainability.

Innovate Through Storms: Thrive Amidst Uncertainty

Amidst disruptions and uncertainties, many organizations adopt a defensive stance, waiting for a return to "normal." However, with the emergence of structural supply-chain issues, rising interest rates, and sustainability challenges, this approach is risky. Companies are advised to innovate, finding new growth areas to ensure long-term success, as merely managing costs and boosting productivity may not suffice.

[📝Full article]

Key takeaway

This article underscores the importance of innovation as a strategy to navigate uncertain times. For investors, it suggests that companies with a proactive approach to innovation, diversification, and adaptation to changing conditions are likely better positioned for future growth. Investors should consider evaluating companies based on their innovation strategies and adaptability, rather than just short-term financial metrics.

Key takeaways from video w/ Guy Spier (finding investments)

Here are 5 key takeaways from the video:

1. Position Sizing and Investment Decisions: The discussion revolves around the importance of position sizing in investments. Even if there's a potential for a significant upside, there's also a potential for a complete downside. The speaker mentions that if something has the potential to go up 20x but also has a potential for a 100% downside, it might be worth considering as a 1% position rather than avoiding it entirely.

2. Investing in Turkey: The speaker discusses his reservations about investing in Turkey due to its political climate, suppression of history, and economic decisions. He contrasts this with his investments in China, acknowledging the contradiction in his stance given China's suppression of the Uyghurs. He rationalizes this by highlighting China's economic growth and its status as a superpower.

3. The Importance of Deep Analysis: The speaker emphasizes the importance of deep analysis before making investment decisions. He regrets not delving deeper into understanding Turkey and its potential investment opportunities, comparing it to his efforts to understand crypto.

4. Learning from Others: The conversation touches upon learning from other successful investors, like Monish and Lee Lou. Monish's approach involves doing 50 deep dives a year, believing that every few years, a significant opportunity like "race ass" will emerge.

5. Setting Up for Long-Term Success: The speaker reflects on his 25-year journey in the investment world and discusses the challenges of navigating regulations and maintaining a focused approach. He emphasizes the importance of having processes and structures in place to ensure consistent success over the next decade.

[🎥Full video]

That’s all for today. Stay informed, stay ahead, and remember that knowledge is the cornerstone of every wise investment decision.