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Investing In Global Economic Growth


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Investing In Global Economic Growth Is Once Again a Viable Strategy

Global Economic Growth Estimates

Source: mjperry.blogspot.com

Investing in global economic growth might be one of the winning investment strategies during 2014 and beyond.  After years of economic chaos and stock market upheaval, which made the global economic growth investment strategy a risky pursuit, the strategy of exposing an investment portfolio to global economic growth appears to once again be viable.

Recent data indicates that European economies are finally joining the United States economy and growing modestly.  Both the United States and European economies are expected to experience an acceleration in growth during 2014.  Economies in Asia are also growing at various rates, and should continue to grow during 2014.  It is looking as though 2014 will be the first year since the 2008 / 2009 financial crisis that the three largest economic regions of the world, North America, Europe, and Asia will experience synchronized economic growth.  Added to this synchronized growth in the three large economic blocks will be continued growth in developing and frontier regions of the world, from Latin America to Africa.  It all adds up to an expectation that 2014 will be a good year for global economic growth and will be a good time to invest in global economic growth to capture the gains that stocks will likely experience from the world-wide growth spurt.

Ways To Invest In Global Economic Growth

There are many ways to invest in global economic growth, from broad mutual fund investments to more targeted Exchange Traded Fund (ETF) investments.

The following are examples of mutual funds that can be used to make broad investments in global economic growth:

  • Wanger International (WSCAX) – This international fund invests in companies in developed markets outside of the United States and in emerging markets, which includes countries such as China, India, and Brazil.  Most of the fund’s investments are made in common stocks of small and medium-sized companies with market capitalizations less than $5 billion, but the fund can invest in companies with market capitalizations above $5 billion on a limited basis.
  • American Funds EuroPacific Growth Fund (RERCX) – This international fund invests in common stocks of companies located in Europe and the Pacific Rim, seeking companies with the potential for long-term growth and above-average capital appreciation.  The fund primarily invests in large capitalization international companies, many of which are familiar names to United States based investors (e.g., Novartis, Samsung Electronics, and Nestle).  The fund can also invest in common stocks and other securities of companies located in developing economies; however, that is not the fund’s primary focus.
  • USAA World Growth (USAWX) – This international fund invests in stocks and other securities of companies located both inside and outside of the United States.  The fund’s focus on both domestic and international stocks and securities provides a means for investors to invest in world growth that includes United States based companies.  The companies that the fund invests in are primarily large capitalization companies.
  • American Funds Capital World Growth & Income Fund (CWGIX) – This international fund invests in both value and long-term growth stocks and securities of companies located throughout the world.  It seeks to provide income from dividend paying international stocks, which makes it an investment alternative for investors seeking to both capture global economic growth and earn dividend income.  The fund invests in companies located both inside and outside of the United States and in developing countries.

The following are examples of ETFs that can be used to make broad investments in global economic growth:

  • Vanguard Total World Stock Index ETF (NYSE:  VT) – This ETF is designed to replicate the performance of the FTSE Global All Cap Index, which is an index that includes equities of thousands of companies located in different parts of the world.  It includes stocks of companies in emerging and developed markets.  VT invests in over 7,000 stocks of companies throughout the world, and provides very broad exposure to world equity markets.
  • iShares MSCI ACWI Index (NASDAQ:  ACWI) – This ETF is designed to replicate the performance of the MSCI All Country World Index, which is an index that includes equities of companies located throughout the world, in both emerging and developed markets.  The ETF focuses on companies in the following sectors:  consumer staples, industrials, financial, discretionary, energy, and information technology.

Investing In Global Economic Growth
Targeted ETFs can also be used to make broad investments in global economic growth.  ETFs that target industries that benefit from global economic growth can be used as vehicles to invest in future international economic growth and stock price appreciation.  For example, the First Trust NASDAQ Global Auto Index (NYSE:  CARZ) ETF invests in the largest publicly traded automobile manufacturing companies in the world and provides exposure to global economic growth via the automobile manufacturing sector.  CARZ should benefit from world-wide economic growth, as car sales accelerate during 2014 and beyond.  The top three holdings for CARZ include European-based Daimler, Asian-based Honda, and United States-based Ford.

Investing In Global Economic Growth Sensibly

Global Economic Growth
Of course, using the time-tested diversification investment approach, it is a good idea to limit investments in global economic growth to a fraction of a total investment portfolio.  Keep in mind that the United States stock market often moves in concert with major foreign stock markets, and many United States based companies generate a large portion of their revenue and profits from overseas operations.  Therefore, investments made in United States-based multinational companies are proxy investments in global economic growth, since you capture not only domestic economic growth, but also economic growth that occurs around the world.  As a result, investing in United States-based multinational companies exposes your portfolio to global economic growth, even if you are not intending to invest globally.

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