Since the United States holds the mantle of the world's largest national economy, it's only natural for North American investors to have a home bias and concentrate their investments within their own country's borders, predominantly in US and Canadian dollars. However, relying solely on domestic investments may not be the optimal strategy.
Although the North American stock market has been on a remarkable upward trajectory, potentially setting a record for the longest bull market, it's important to recognize that this trend cannot last indefinitely. History has shown that US stocks have experienced periods of underperformance compared to international stocks, and predicting the future of the stock market is impossible.
Maintaining a home-biased portfolio can result in suboptimal risk-adjusted returns. Portfolio management best practices emphasize the importance of international diversification to reduce overall volatility and enhance wealth strategies.
Considering that global equity assets make up more than 50% of invested assets, while the US represents around 43%, it makes logical sense to include a significant portion of diversified international assets in a portfolio to mitigate the risk associated with overexposure to a single country.
Determining the ideal percentage of international investments in a North American investor's portfolio can vary depending on individual preferences and risk tolerance. Some advisors suggest a target allocation of 50%, while others recommend a range of 5% to 30%. Beginners may choose a smaller percentage, gradually increasing it over time, while more seasoned investors may feel comfortable going up to 30% or even higher.
True international diversification means accepting that a portfolio may not always deliver the highest returns in any given period. However, an internationally-diversified portfolio is generally better equipped to weather local crises and market downturns. Moreover, it enables investors to capitalize on global growth opportunities over the long term.
In the long term, a well-diversified, global portfolio can help avoid unnecessary risks.
In the pursuit of a resilient and globally diversified portfolio, jurisdictional diversification is key. Merely holding a few emerging market mutual funds at a local bank, even in different currencies, falls short of achieving true international diversification. To achieve effective risk diversification, it's necessary to explore jurisdictions outside of North America, engage with non-domestic financial institutions, and hold a range of foreign investments and currencies. Collaborating with a wealth manager who possesses comprehensive international experience and a global outlook offers a distinct advantage over a local investment advisor, enabling true international diversification.
Future financial well-being shouldn't be tied to just one country, one market, one currency, and one perspective.
North American financial professionals for the most part, understandably focus on their home markets, local financial institutions, and dollar investments. However, to achieve greater resiliency for an overall portfolio through international diversification, a global-oriented wealth manager will target different investments than a domestic advisor. Holding a portion of a portfolio in a bank outside of the North American banking system provides institutional risk diversification and greater flexibility. Currency diversification provides a hedge against a falling US dollar. The prudent investor shouldn't walk around blindfolded but should prepare for bumps that may arise along their home-market roads.
Switzerland, with its unwavering commitment to economic and political stability, neutrality, and unparalleled expertise in private wealth management, remains the global leader in cross-border wealth management, capturing over 25% of the market share, with approximately half originating from international investors.
Switzerland's enduring success as an innovative financial center stems from its adherence to traditions of reliability, continuity, and excellence, all while upholding privacy and discretion in an increasingly transparent world. Particularly during times of crisis and heightened volatility, astute international investors seek Switzerland as a safe haven for their assets. Notably, Switzerland has been recognized as the world's most resilient country, equipped to handle the challenges posed by the pandemic crisis and its aftermath.
Switzerland remains the global leader for crossborder wealth management.
By choosing Switzerland as a financial hub, investors gain access to a wide range of high-quality services, extensive expertise, and experience, all underpinned by the highest levels of stability and reliability. These qualities are paramount for those concerned about preserving their assets for future generations.
Getting started on the path to international diversification with a Swiss SEC-registered wealth manager is both straightforward and efficient. These wealth managers specialize in providing US tax-compliant wealth management services to both US persons domiciled in the United States and abroad, with some extending their services to Canadian investors as well.
Establishing a relationship with a Swiss SEC-registered wealth manager and setting up an internationally-diversified portfolio with a Swiss bank can be done remotely, without leaving the comfort of home. The chosen Swiss wealth manager will guide investors through every step of the process.
Swiss SEC-registered wealth managers encompass a range of options, from larger firms associated with banks to the US-focused entities of Swiss private banks, as well as smaller, personalized independent wealth management boutiques. Minimum investment amounts can vary, starting at USD 100,000, USD 250,000, USD 500,000, or even higher, depending on the individual wealth manager. Many of these managers regularly travel to the US and Canada to meet with clients and advisors, but in an increasingly connected world, online meetings and conferences offer convenient alternatives. Switzerland is never more than a phone call or a click away.
Switzerland: Perhaps the safest place for assets in an increasingly unsafe world.
Swiss SEC-registered investment advisors are also eager to collaborate with North American financial professionals and other advisors, working together to develop an internationally-diversified portfolio that complements existing home-based portfolios.
Discovering a suitable Swiss SEC-registered or Canada-licensed wealth manager is a breeze with the AW+SWITZERLAND platform. It provides easy access to comprehensive listings, allowing investors to comfortably and efficiently explore various wealth managers, their websites, SEC registrations, ADV Part 2 and Part 3 brochures, and essential information such as company size, assets under management, investment strategies, fees, and more. Initiating contact with a preferred wealth manager can be as simple as sending an email or initiating a conversation.
AW+SWITZERLAND is delighted to facilitate personal e-introductions to any of the Swiss wealth managers, making the process of getting started even more seamless and convenient.