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Political chaos in Westminster doesn\u2019t have to mean our life savings fall\u00a0victim as collateral damage. Online platforms make it easier than ever to invest internationally to reduce political risk and increase exposure to capital growth and income.<\/p>\n
Despite\u00a0these facts, many British investors have far too much focus on our domestic economy. Shares listed in London represent only 3.25 per cent of the global total by value but it\u2019s not unusual for shareholders to have ten times that much invested in Blighty.<\/p>\n
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Technological innovation is changing the world faster than some folk realise. Did you know that nine of the top ten biggest businesses are American and the odd one out is Taiwanese? There\u2019s no need to take my word for it, this is based on the most widely followed benchmark of international stock market valuations, the MSCI All Country World index.<\/p>\n
Your humble correspondent believes the best strategic decision I made in the past decade or so was to go global with my forever fund<\/a>, forget being patriotic with the pension and remember that there is a world of opportunities just a click away.<\/p>\n Easily the most convenient and cost-effective way to do this is with a pooled fund, such as a unit or investment trust or an exchange traded fund (ETF), with a global remit. While the past is not necessarily a guide to the future, it does provide a factual basis on which to hazard a guess, so \u2014 frightened by the news at home and overseas \u2014 I tend to favour funds or businesses that survived both world wars and the Great Depression.<\/p>\n That\u2019s why, when it came to investing for my grandchildren<\/a>, who have yet to take an interest in such things, I chose Alliance Witan, founded in 1888 and holding assets of \u00a35.4 billion; F&C Investment Trust \u2014 formerly Foreign & Colonial \u2014 founded in 1868, with total assets of \u00a37.1 billion; and, most recently, Scottish Mortgage, founded in 1909 with \u00a316.3 billion.<\/p>\n All three have dozens of underlying holdings in many different commercial sectors, spread around the globe. Their annual charges are, respectively, 0.47 per cent, 0.45 per cent and 0.31 per cent.<\/p>\n Even as an enthusiastic DIY investor, those fees seem fair to me for professional stock selection worldwide. Nor is there anything dull about underlying assets or performance. Scottish Mortgage leads the Association of Investment Companies\u2019 global sector over the past decade and one-year periods with total returns of 487 per cent and 45 per cent. For completeness I should add that even after a bit of a blip during the past five years it delivered 35 per cent.<\/p>\n This was achieved with a portfolio in which the most valuable asset is Space Exploration Technologies, or SpaceX, which has a punchy 19.3 per cent of net asset\u00a0value. If the eccentric billionaire Elon Musk, the founder of SpaceX, can achieve his ambitions for a stock market flotation this summer, it would be the biggest initial public offering in history.<\/p>\n That was the main reason I paid \u00a311.64 per share for Scottish Mortgage in March, as reported here at that time. Two months later, despite all the bad news since, they traded at \u00a314.31 on Friday.<\/p>\n Interestingly, all three of these global funds\u2019 top ten holdings include Taiwan Semiconductor Manufacturing, which is the exception to American dominance of the world\u2019s biggest businesses mentioned earlier. I wouldn\u2019t dare buy it directly, because I fear that one day we might wake up to learn that Xi Jinping, the Chinese leader for life, has decided to reunite that island with the mainland. Perhaps talks with the American president, Donald Trump, in Beijing last week will reduce that risk but it\u2019s too soon to say.<\/p>\n Either way, spreading our money over different assets reduces our exposure to setbacks or total disaster at any one company, country or currency.<\/p>\n Not so long ago, English-speaking investors associated \u201cpolitical risk\u201d with far-off countries, subject to the extremes of ideology and intermittent expropriation of private property. Sad to say, the antics of recent Conservative governments led some American observers to compare Britain to \u201can emerging market\u201d.<\/p>\n Larry Summers, a former US Treasury secretary, went further and said the UK was \u201clike an emerging market turning itself into a submerging market\u201d, shortly after Liz Truss\u2019s 2022 mini-budget. Other critics on this theme included the billionaire Ray Dalio and the emerging markets fund manager Mark Mobius. More recent proposals by the Labour government to force company pensions to take more risks with other people\u2019s money did nothing to ease worries, although these plans were dropped after widespread criticism.<\/p>\n While we wait to find out if Labour will ditch its leader,\u00a0government bond prices are falling, pushing up the cost of borrowing to a 28-year high. All this drama reminds me that one of the first financial features I ever wrote, for another newspaper on Fleet Street 40 years ago, was about busted bonds issued by the biggest emerging market of its time, Russia.<\/p>\n Now I have a small collection of these worthless securities \u2014 sometimes called scripophily \u2014 from Argentina, Brazil, China and Russia. Pinned to the ceiling of the attic where I write, they serve as cautionary reminders that values can plunge to zero. I don\u2019t suppose things will go so wrong here any time soon but I would rather not bet all my life savings on being right.<\/p>\n Bear in mind that Angela Rayner, the former deputy prime minister, wrote last Sunday about \u201cending freehold for good\u201d, although homeowners must hope she meant leasehold. Another potential Labour leader, Andy Burnham, recently repeated that Britain is \u201ctoo in hock to the bond markets<\/a>\u201d, as if we might default on our debts, like all those emerging markets\u2019 promises that proved worthless long ago. The interest on British debt already costs more each year than we spend on defence.<\/p>\n