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Diversification or Diworsification?

We recently came across a blog by Lawrence Hamtil which supported one of our long-standing beliefs, the US market offers the best and deepest market to generate returns and minimize risk. It appears investors diversifying by investing in emerging markets have only hurt their risk/return profile over the last 21 years.

And it’s no surprise to us as emerging markets, in many cases, only increase your exposure to the most volatile parts of the market, a segment our process focused on sustainable dividend growth tends to avoid. As Lawrence says, “It is remarkable how similar a portfolio of 60% MSCI USA with 20% S&P 500 Energy & 20% S&P 500 Materials tracks the 60-40 MSCI USA / MSCI EM portfolio over time.”

This post is presented for illustrative and discussion purposes only. This post should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities and it does not consider unique objectives, constraints, or financial needs of the individual. Under no circumstances does this post suggest that you should time the market in any way or make investment decisions based on the content. Investors are advised that their investments are not guaranteed, their values change frequently, and past performance may not be repeated. References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by Bristol Gate Capital Partners Inc. The information contained in this post is the opinion of Bristol Gate Capital Partners Inc. and/or its employees as of the date of the post and is subject to change without notice. Every effort has been made to ensure accuracy in this post at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and Bristol Gate Capital Partners Inc. accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. We strongly recommend you consult with a financial advisor prior to making any investment decisions. Please refer to the Legal section of Bristol Gate’s website for additional information at www.bristolgate.com.

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