How We’ve Outperformed The S and P 500 6-To-1
If you are like most Americans, you have the majority of your stock holdings in U.S.-based companies. It’s called “home-country bias,” and it can be a huge mistake.
Think about it… The company you work for is likely based in the United States. If you own a home, then you have exposure to the U.S. real estate market. In other words, your entire financial livelihood is based entirely in the United States.
It’s not hard to see why this could be a problem. Your income and the value of your home are completely tied to the United States, so why choose to do the same with your portfolio?
Not only is this risky, but it can be extremely limiting when it comes to your portfolio’s performance — especially for retirement accounts and long-term holdings.
According to research from Credit Suisse and the London Business School, since 1964, U.S. equities have produced an average annual return of 5.8%. That’s okay, but not as good as the UK market, which posted an average annual return of 6%. The U.S. also lagged far behind South Africa’s 8.2% annual return and Sweden’s 8.5% annual return.
The data demonstrates that gains can be much better in markets other than the United States, so keep that in mind when you’re allocating money in your long-term investment portfolio.
Even shorter-term traders should have exposure to international markets. When it comes to country-wide performance in the past six months, the United States isn’t even in the top 10.
|Index||Country|| 6-Month |
|National Stock Exchange of India||India||24.5%|
|Stock Exchange of Thai Index||Thailand||20.0%|
|Hang Seng Index||Hong Kong||14.9%|
|SZSE Component Index||China||14.0%|
|Indice de Precios y Cotizaciones||Mexico||12.5%|
|FTSE All-Share Index||UK||9.9%|
|S&P/TSX Composite Index||Canada||8.0%|
|Indice General de la Bolsa de Valores de Columbia||Columbia||7.6%|
|S&P 500||United States||7.3%|
The S&P 500 has delivered a robust 7.3% return over the past six months. Again, that’s not bad, until you look at the performance of the countries higher up on the list, including China at 14%, Brazil at 15.1%, Turkey at 20.9% and blistering India, with a six-month performance of 24.5%.
We’ve been able to take advantage of this strength in international markets in my premium newsletter, Alpha Trader.
In my research service, we rank every stock in the market by assigning them an “Alpha Score” from 0 to 100. The score is derived using a company’s financial information and its stock’s technicals. The higher a stock’s combined score, the more likely it is to move higher in the coming months. Best of all, we can use the score to identify blue-chip… small-cap… natural resource and even international stocks with the most potential.
As of this writing, for example, 10 of our current Alpha Trader picks are based outside of the United States. These holdings have an average return of 34.9% since our original purchase dates. That number dwarfs the average total return of the S&P 500 of just 5.5%.
Moreover, several stocks here have been big winners for Alpha Trader members, including UK-based AstraZeneca (NYSE: AZN) at 22.3%, Netherlands-based NXP Semiconductor (NASDAQ: NXPI) at 65.4%, and our biggest winner to date, China-based Bitauto Holdings (NYSE: BITA), with an incredible 287% total return.
Now, don’t misunderstand, there’s nothing wrong with owning the right U.S. stocks at the right time. In Alpha Trader, we identify stocks most likely to outperform based on our system, and if those stocks are U.S.-based, then great. However, we don’t shy away from the right international stocks.
Bottom line: If you want big gains in the market, then you need to look beyond U.S. borders to wherever the best stocks are according to your investing or trading strategy. That’s true whether you’re a long-term, buy-and-hold investor, day trader or a longer-term, rules-based trader like we are at Alpha Trader (you can learn more about our strategy here).