Global Diversification: Balancing International Exposure in Your Portfolio
Everyone is telling you to go global.
Taiwan. Korea. Japan. Hong Kong.
Emerging Asia.
Dollar assets.
AI
The content is persuasive.
But nobody asks the questions that matters
Let's look at the markets you're being sold.
Taiwan : concentration disguised as diversification
One company, TSMC is 42% of the index.
Taiwan upped the equity fund limit in single company from 10% to 25%.
A rule effectively written for one company.
In India, regulators would be accused of distorting the level playing field.
China - 19yrs of patience, still waiting
Shanghai Composite touched ~6127 in 2007.
Today its around 4100.
Nearly 2 decades later.
Still 33% below peak levels.
Before inflation.
In India, a market that eroded wealth for 19 yrs would dominate election speeches and primetime debates.
South Korea: the value trade delusion
For yrs investors were told
Korea was cheaper than India.
Today it isn't.
KOSPI PE: ~23x
Nifty 50 PE: 20.6x
And roughly half of last year's entire KOSPI rally came from just 2 stocks.
Yet investors are told India is the expensive market.
Japan: An expensive lesson in investing history
Nikkei peaked at 38915 in Dec 1989.
It took 34 yrs to get back there.
that's 3 decades/ an entire generation.
In India, investors get jittery if recovery cycle lasts beyond a yr!
Hong Kong: the undisclosed risk
Investors thought they were owning slice of HK financial market
What they actually owned was growing exposure to mainland Chinese tech.
Tencent.
Alibaba.
Meituan.
Then Beijing launched its tech crackdown in 2021
The Hang Seng fell about 40% in less than a yr.
Its 10 yr annualized return?
1-5% depending on window
In India, investors would call this political risk.
In Hong Kong, it was called diversification.
Am i saying India is perfect?
No...
Sector concentration exists.
But SEBI MF rules cap a single stock at 10%.
No exceptions.
No celeb stock carve-outs.
The system is designed to force diversification.
Not sell concentration.
And when foreign investors sold record amounts
domestic investors absorbed the shock.
That's not luck.
That's market depth.
The uncomfortable truth:
Global investing is useful.
International ETFs are useful.
Dollar assets are useful.
In the right proportion.
Somewhere along the way, diversification became a sales pitch.
And sales pitches usually carry commissions.
10-15% global exposure for retail investors is diversification.
Rest is hype
The myth - Money becomes smarter the moment it crosses a border.
It doesn't.
Sometimes all that crosses the border is the fee.
Originally published on LinkedIn
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