How to Diversify Your Investment Portfolio Beyond the U.S. and Into European Assets
The Nasdaq is busting out today, breaking above the 6,000 mark for the first time ever. The tech-heavy index has gained nearly 12% since the start of 2017, while the S&P 500 Index has tacked on more than 6%.
Despite some rocky stops and starts that have frazzled many investors, stocks are signaling that they are not done yet.
But the U.S. market isn’t the only one flexing its muscles. The German DAX has gained approximately 8.6% since the beginning of the year.
And despite the anxiety over the French presidential election, the French CAC 40 has gained roughly 8.5%.
With stock markets notching significant gains around the globe, it’s important to make sure that you take advantage of these opportunities by properly diversifying your portfolio. That’s why I contacted an expert in the European market…
Beyond the American Border
While the American market is showing some nice strength, it’s important to remember that stocks don’t climb upward in a straight line. That’s why it’s critical to diversify your portfolio outside the U.S.
Today, I’m chatting with Robert Vrijhof, president of WHVP. He leads a Swiss portfolio management service adhering to conservative principles of investment diversification and asset protection. WHVP is registered with the Securities and Exchange Commission to allow it to freely work with its American clientele, both on a long-distance and face-to-face basis. Since 1991, WHVP has been an independent asset manager with offices in Zurich.
Jocelynn: Why is it important to invest some of your wealth outside the U.S.?
Robert: It is, and has been, of utter importance to diversify part of your total wealth outside of the U.S. and outside of the U.S. dollar. Diversifying outside of your domestic currency opens your portfolio to opportunities that are not available in the U.S. We at WHVP have been assisting U.S. clients for over 25 years to open foreign bank accounts and invest internationally.
We have been investing not only in foreign currencies but also in stock markets worldwide, as well as in short-term foreign bonds. For example, we are currently looking at high-quality bonds in Russian rubles, where we are still receiving a yield over 8%.
We are well aware that there has been a lot of talk about the dollar’s strength, but we, as contrarians, strongly believe that the U.S. dollar will get weaker in the years to come. Let’s not forget that the Swiss franc has gained 40% versus the U.S. dollar during the past 15 years.
Jocelynn: What percentage of your portfolio do you think should be invested internationally? Should the rest be domestically held? Should there also be a percentage held in precious metals or some other asset?
Robert: It is very important to keep a large percentage of your total wealth in your domestic currency. We at WHVP suggest holding 60% of your total wealth in your domestic currency. Obviously it also plays a major role how you are domestically invested.
For the 40% we feel you should hold offshore, it is important to know that foreign bank accounts have a relatively high minimum, which is not for every investor. We at WHVP have a minimum account size of $500,000.
We think it is smart to hold some precious metals in your portfolio. Currently, we are favoring investments in physical gold and Canadian gold stocks, as well as silver. We buy physical 1-kilo gold bars for our clients, which, if deemed necessary, can be delivered to the client.
Jocelynn: Is investing in Switzerland still an option for Americans following the implementation of FATCA?
Robert: Despite FATCA (Foreign Account Tax Compliance Act), we are still convinced that with everything Swiss banks and Swiss independent asset managers have to offer, it is a great option for U.S. citizens. The banks we work with regularly deliver tax statements on your bank account, which will be mailed to your home address before the end of March.
The Future of the EU
Jocelynn: Let’s switch gears just a little bit. You’ve convinced me that it’s a good idea to diversify my portfolio overseas, but is now a good time? Do you believe the EU is in danger of falling apart in the next year?
Robert: We might be facing some obstacles in this important election year. We do, however, believe that the EU, as well as the euro, will not cease to exist. Economically, we are seeing surprisingly strong numbers coming in from Germany and the Netherlands. Even countries such as Spain are improving slowly but surely.
We are eagerly awaiting the conclusion election in France, which will be on May 7. An outperformance of European stock markets versus the U.S. stock market is an option that we are not counting out. We would not be surprised if we see the euro coming in stronger toward the end of 2017. Having said that, we are currently not invested in the euro, but we will give this currency a closer look after the election in France.
Jocelynn: What kind of investment opportunities do you see for Europe? Where is your focus?
Robert: We are currently underweight in European stock markets and are favoring the Swiss stock market, where we prefer defensive stocks such as Nestle and pharmaceuticals. To top it off, we are convinced that the Swiss franc will be stronger versus the U.S. dollar. One of the reasons for this is the current fragile state of the world, be that North Korea, Syria or Russia. Due to the positive growth numbers that have been published by China, we also favor the Australian dollar.
Jocelynn: One way of diversifying your portfolio is through your new product, the Permanent Portfolio. Could you explain how that works?
Robert: During the past couple of years, we had a lot of inquiries coming into our office where investors were ready to open a Swiss bank account but did not have the minimum of $500,000. We have been looking for a solution for this matter for quite some time and have now found a banking partner in Vienna, Austria, that is willing to open accounts with a minimum of $250,000, and they have significantly dropped their administration fee.
The way the Permanent Portfolio is handled is as follows:
Once the personal account is opened at the custodian bank with WHVP holding a limited power of attorney, the account will be invested 25% in each category: foreign currencies, precious metals, bonds and equities.
The Permanent Portfolio will be reallocated once per year during the first two weeks of January, where all investments will be set back to the initial 25%.
For example, if the investments of your stock holdings have fallen back to 22% and the gold and silver investments traded up to 28%, then 3% of your precious metal holdings will be sold and your investments in your stock holdings will be increased to the allocation of 25%.
Since this is not an individually managed account — meaning all clients will be invested in the same manner — we are able to offer the Permanent Portfolio at a minimal fee of 0.25% per quarter.
We hope that this new service will give more people the opportunity to invest part of their wealth into foreign investments. This is a unique chance to profit from accessing international investment opportunities, a protection against a sinking domestic currency, great diversification and exceptionally low fees.
Jocelynn: What’s a good way for readers to reach you for more information?
Robert: To learn more about us and our services, please feel free to check out our website, www.whvp.ch, or send us an email: firstname.lastname@example.org. If you are interested in WHVP’s market view and perspective, please feel free to sign up for our complimentary newsletter or follow us on Facebook.
Sr. Managing Editor, Sovereign Investor Daily
P.S. You can meet Robert — as well as Banyan Hill’s editors — at the Total Wealth Symposium to talk about your investing goals and learn great ways to grow your wealth. But you need to sign up now. We are almost out of seats! To reserve your spot, click here.