International Survey: It still pays to think global

Despite recent market reversals, shrewd investors will maintain an international flavour to their portfolios

Unitholders with investments in a number of unit trusts with large holdings in Malaysia, including Fidelity ASEAN, HSBC Singapore & Malaysia and Tiger Index funds, have been shocked by the temporary suspension of dealing. This has left them unable to buy and, more importantly, sell their units. The funds together with Autif, the trade association, and Imro, the investment watchdog, are trying to find a way that dealings in the funds can re-start.

The problem has been caused by the imposition of currency and capital controls in that country which has left fund managers with holdings in Malaysia unable to repatriate any of their money back to the UK before September next year at the earliest.

This and the state of world stock markets over the last couple of months has brought home the reason why investment funds carry a health warning that prices can go down as well as up. From the July peaks in most of the developed world's markets in Europe and America, share prices have tumbled by around 20 per cent.

The turbulence that began in global markets started in the Far East in the summer last year. Having calmed down, the decline in the Asian tigers turned into a contagion this spring. It then spread to other emerging markets, including those in Latin America and Europe, especially Russia, and stopped the raging bull market in the US and Europe in its tracks.

And it is not over yet. Events in Japan, where the government has still to pull its economy into shape, has increased volatility. Nervousness among investors has been further heightened by fears of a devaluation by the Chinese authorities of its currency, the yuan, the possibility that an international trade war may break out and that some countries may impose currency and stock market controls, and that the Group of Seven, the world's leading industrial nations, may not get its act together in time to stop a possible recession developing into a global economic depression.

In the light of this, should we still consider investing internationally? The answer to that is, yes. Despite all the fears and the recent market falls, the reasons for investing in an international portfolio remain as convincing as ever.

While putting money into UK companies is normally the first equity investment for most savers, after this, they are usually advised to go international. This is because economies around the world are normally at different stages of the economic cycle.

This means that prospects can be better elsewhere. Despite the recent falls, mainland European markets that are busy getting ready for the introduction of the euro currency in 1999, have been among the best performers on the international scene this year and most are still showing worthwhile gains since January.

But investing overseas can be a costly and time consuming exercise. Some markets are difficult to invest in. It is expensive to buy foreign shares and there is the added problem of taking currency risks. Even more important, it can be very difficult to get up to date information on foreign companies.

Luckily, there are plenty of unit and investment trusts that specialise in international investments. They offer ready made portfolios that can be bought into quite cheaply. These funds take all the hassle out of global investing.

One of the best means of investing internationally is by regular saving. By putting in a set amount each month, you will iron out the peaks and troughs seen in markets. It means that when prices fall, you will buy more units or investment trust shares for your money. All the main fund management groups now offer special regular saving plans, some starting from as low as pounds 25 a month.

But whether you are considering a lump sum or regular savings, you should take a five or ten-year view. Then you can ignore temporary setbacks, such as we are seeing at the moment. Past investment history shows us that over such a period, equity investment usually outstrips any other form of savings.

Going international can suit the cautious investors. By spreading your money in different economies, you will benefit from the fact that while some may be in decline, others will be on the way up.

"Be very selective and check that the funds that you are interested in are investing in the key developed markets. Be very wary of any that have holdings in the emerging markets," advises Graham Bates, a Leeds-based IFA.

This is backed up by Roddy Kohn, of Kohn Cougar, who says: "Do not be afraid of international investment. Most of the damage in the markets has already been done.

"However, do look at the underlying portfolios. Good managers will have invested in the larger international blue chips, such as Coca Cola, Shell and Glaxo. These will stand the test of time."

General international unit trusts on offer from all the major groups are the least risky. Most have anything up to half their investments in the US, with the rest spread around the world.

International investment trusts could suit those prepared to take a higher risk. Their share prices have fallen faster than their net asset values over the past couple of months, which means that they can be bought on large discounts. Because of this, it is currently possible to buy pounds 1 worth of assets for around 82p. Over the long term, general international trusts such as Alliance, Foreign & Colonial and Witan have produced very good returns for their shareholders. But do be cautious as prices and discounts may have further to fall. Most of the leading investment trusts, like unit trusts, have regular savings plans, starting from as little as pounds 25 a month.

Risks are much higher with sector, country or region specific funds. Some emerging market funds, for example, have lost over 50 per cent or more of their value over the past two years. So while in the long term these could show sizeable gains, in present market conditions they are really only for the hardened gamblers.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
news
Sport
footballLive! Chelsea vs West Ham kicked off 10 Boxing Day matches, with Arsenal vs QPR closing the action
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Arts and Entertainment
Madonna is not in Twitter's good books after describing her album leak as 'artistic rape and terrorism'
music14 more 'Rebel Heart' tracks leaked including Pharrell Williams collaboration
Sport
football
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all