Thus far, 2021 has us all focused on the impacts of the ongoing COVID-19 pandemic and its resulting fallout both at home and abroad. And while this deserves our attention, it’s important not to lose sight of other powerful trends that will shape both our lives and our investment portfolios for years to come. One such trend is the growing importance of China and other emerging market countries to the global capital markets landscape.
As Australians, we are in a unique position to witness China’s growth due to both our geographic proximity and the relationship between Australia’s commodity exports and China’s demand for them. But even with the advantage of this perspective, it is all too easy to underestimate how important China and other emerging market countries have become to global capital markets and therefore investor portfolio allocations.
Indeed, that latest data demonstrates that many Australian investor portfolios are under-diversified and exhibit a bias towards domestic shares. According to a 2020 ASX Survey, just a 15% of Australian investors reported holding international shares held directly.
Three Surprising Statistics on “Emerging” Markets
For a better sense of just how large China and other “emerging” market countries are set to become, consider the following three statistics:
- China now accounts for 18% of global GDP and is projected to account for 20% of global GDP by 2025.
- China now has the second largest stock market and third largest bond market in the world.
3. According to Standard Charter, by the year 2030, seven out of the world’s ten largest economies will be from emerging markets.
These statistics bear out the need for Australians to incorporate the growing economic importance of China and other emerging markets into portfolios in an intelligent way.
How We Create Diversified Portfolios
One of the most important things an investor can do to maximise the odds of achieving their wealth objectives is take advantage of the power of diversification in their portfolios. This is because, all else equal, a more diversified portfolio creates a smoother ride for investors and reduces the likelihood that an investor will have to withdraw money during a painful drawdown.
At Partnervest, we pride ourselves on constructing portfolios that incorporate global investment opportunities to maximise the benefits of diversification for our clients. Across both stocks and bonds, we seek out managers that have the skill to access global investment opportunities and, in some cases, utilise active managers with the objective of achieving superior returns.
To learn more about how you can start building a sound financial future, visit our website at https://partnervest.com.au/.
All investments carry risk. Before deciding to invest, you should consider the following key risks:
• The value of investments will vary. You can lose money as well as make money.
• The level of returns will vary, and future returns will differ from past returns
• Returns are not guaranteed and investors may lose some or all of their money, and laws change.
Past performance is not an indicator of future returns. Issued by Partnervest, a division of Legg Mason Asset Management Australia Ltd (ABN 76 004 835 849 AFSL 240827). Legg Mason Asset Management Australia Ltd is a part of Franklin Resources, Inc. operating as Franklin Templeton.
Before making an investment decision you should read the relevant Product Disclosure Statement (PDS) carefully and you need to consider, with or without the assistance of a financial advisor, whether such an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. The PDS is available and can be obtained by contacting Partnervest on 1800 679 541 or at www.partnervest.com.au.
Partnervest is a division of Legg Mason Asset Management Australia Ltd (ABN 76 004 835 849, AFSL 240827). Legg Mason Asset Management Australia Ltd is a part of Franklin Resources, Inc. operating as Franklin Templeton. Any views or opinions expressed in this message are those of the individual sender, except where they are specifically stated to be the views of Franklin Resources Inc. or any of its associates. It is your responsibility to scan this communication including any file attachment for viruses and other defects. To the extent permitted by law, Franklin Resources, Inc. and its associates will not be liable for any loss or damage arising in any way from this communication including file attachments