What other foreign stock categories tend to do better than average?

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David John Marotta
President, Marotta Wealth Management, Inc., Marotta Wealth Management, Inc.
http://www.emarotta.com  
434-244-0000

David John Marotta is the President of Marotta Wealth Management, a fee-only financial planning and asset management firm in Charlottesville, Virginia. He is an oft-quoted writer and speaker on financial matters and his weekly financial column can be found at www.eMarotta.com

What other foreign stock categories tend to do better than average?

 

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Host: What other foreign stock categories tend to do better than average?

David Marotta: There is another category of foreign stock that tends to do better than the average and that is countries with the most economic freedom. So, the United States is only one of those countries, there are also several others. We use the Heritage Foundation's Measurement of Economic Freedom and what it measures how easy it is to move money in and out of the country? How little government control there is on the markets? How well the court system is to settle disputes? And the countries with the most economic freedom currently include things like Hong kong, Singapore, Australia, United Jingdom, Ireland, Switzerland, Canada, Netherlands, Germany, Sweden and Austria. So, these countries will have higher Gross Domestic Product growth and that shows up in stock market returns. We do a study every year and found the countries with the most economic freedom end up beating the EAFE Index of developed countries by about 4% a year. That's a huge amount, if you can get an extra 4% a year simply by diversifying in some of the most stable countries in the world, you are getting a better return and also lower volatility.

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