Enhanced thinking on overseas investing

I spent a lot of time thinking about how to get my portfolio the necessary overseas/developing country exposure right from the the start when I started taking investing seriously. However, my thinking was limited to buying into country-specific funds and Vanguard Emerging Market ETF -VWO.

Around the same time, being overwhelmed with news and information about the United States economy, I understood the need to be invested in large-caps through out 2007 as it was obvious that they will be out-performing the small-caps over the new couple of years at least.

However, it seems I limited my thinking about overseas investing by exposing myself to too much risk in the form of what I owned (IIF and VWO). Luckily, the fast growing emerging markets prevented embarrassment. The US economy lags behind significantly this year in growth compared to other markets:

Country2007 growth
China	11.5%
India	8.9
Russia	7.0
Middle East	5.9
Central/Eastern Europe	5.8
Brazil	4.4
United Kingdom	3.1
Mexico	2.9
Euro area	2.5
United States	1.9

However, I could have done a better job of not only benefiting from overseas exposure, but even achieving a more balanced portfolio had I thought about things a little more. Large US companies have a significant exposure to foreign markets. On an average, the S&P 500 companies get approximately 50% of their revenue from goods that are made or sold overseas.
Also more recently, the falling dollar I suppose helps too in making the American goods more cost-competitive internationally. Intel (which is one of the only 2 out-and-out stocks that I own, part of a very badly managed and tiny Roth-IRA), Coca Cola, McDonald's, Exxon Mobil just to new a few HUGE companies have close to 70% of their revenues from overseas.

So, owning a large-cap U.S. growth ETF or an S&P 500 ETF, you might have provided me with all the multinationals I would need, while at the same time moving me a lot more steps closer to a balanced portfolio.

Well, lesson learned! It seems investing is like a practice. At least it is for me.

The question that bothers me however is that if all of these large-caps have so much overseas exposure AND I would think large-caps make up a significant part of the entire US economy, wouldn't all that growth in other countries in turn reflect in growth in these companies and onto the growth number of US economy itself? hmmm......

Warren Buffett thinks like me!!!

......well, not really, but its a title that makes this post without a picture a little more interesting to read!

Very often I stumble on an article or two on what successful, powerful, smart and admirable people offer as suggestions to the mere mortals. As a side note, I always wonder who these "lucky" interviewers are who get to meet these superstars and ask the question. Do you think they might slip in a couple of personal investing questions just in case they get a lucky?

Anyways, while reading about those investing tips from Warren Buffett, I noticed that if you simply adopt a discipline and the benefits of a good investment vehicle like ETF, you cover the spread on most such lists without even trying very hard. Lets analyze:

1. Invest in Businesses, Not in Stocks
When you invest with ETFs, you buy into a sector, or maybe a broader index, a basket of stocks. Not individual stocks. You have a pretty good hedge in that case on buying into a business.

2. Only Buy Businesses that You Understand
I don't really get this because you are limiting your options in diversification if you use this rule too strongly. I work in IT and hi-tech, software industry, but I am not sure if I can even claim to understand the entire business.

3. Buy Companies with Defensible 'Franchise'
This generally implies that you invest in large caps and avoid riskier small caps that do not have a control over the entire market segment . I think this is a sector specific subject and you should have a solid basket of stocks in consumer goods, commodity companies, etc.

4. Hold for the long term
Is there any other way? According to me, not holding for the long term means that you have to sell! Now that would just be too much work for a lazy investor. With ETFs you don't want to be paying commissions anyways, so might as well just buy and hold.

5. Ignore Short-Term Fluctuations in Price
Looking at short-term fluctuations is like thinking your married life is going to be as much fun as that one night stand and running off to vegas for a drive-through wedding! Ok, not exactly an example that makes perfect sense, but you get the point.

6. Buy Good Businesses When Prices are Down
My thoughts exactly! My reason for this is however very simply due to the fact that I don't really have a very solid "when to buy" set of rules. So I only buy an ETF when I am convinced that it is below a 200-day moving average and has gotten there after a downward trend and there are strong factors that have brought it there.

7. Don't Be an Active Trader
That would require you to be "not lazy". Forget that.

8. Do Not Over-Diversify
Not out of choice, but I think I got this covered :-). Aren't you aware of my constant struggle to getting to that Zen-like diversified portfolio?

9. Invest Only When There is a Margin of Safety
This probably sits better with funds, but if I figure out how to translate this to EFTs, will let you know. I think it means you try and buy something that has a higher value than the current price reflects. But isn't the whole purpose of the stock market to balance out the price and value?

There you go, though I can still not figure out why the title of that article is "Billion dollar investing ....."!