Borderless Investor

When markets blow up - and rise again from the ashes as they are doing now - it can often seem like international investing is a pointless exercise. Why bother diversifying if the world is increasingly correlated and moving in the same direction anyhow?

Well, there are plenty of great reasons to bother. Mainly it’s in the form of the greater opportunity set that arises when you look overseas. But it’s also important to remember that correlation is only one of the variables in the portfolio risk formula. You can still benefit from diversification even if correlations are rising.

This paper is a little old, but the lesson for today’s markets is fresh. Meir Statman and Jonathan Scheid do a great job explaining why global diversification still matters.