With only 85 days left until the next opportunity for Congress to unleash apocalypse on Wall Street in the form of a debt default, it’s a great moment to think about reducing risk in your investment portfolio. Because bourses worldwide have globalized, a U.S. debt default would almost certainly roil markets from New York to New Delhi. Luckily for the risk-averse, there’s still one set of markets out there that may stay bubo-free when the NYSE catches the plague. If you want to preserve at least a part of your retirement nest egg from Washington-induced calamity, start buying up stocks in Africa.
One of the first rules for successful investment is “diversify your portfolio.” If you want a higher return at lower risk, buy stocks and bonds that don’t rise and fall together. Think builders and debt collectors—builders do well when the economy is growing, debt collectors do better in lean times. An investment portfolio split between construction and debt collection should be considerably more stable than one invested in one or the other.
Globalization gave investors a whole new way to diversify, by putting their money in foreign markets. As barriers to overseas investment fell, savvy investors in the West started putting some of their portfolios in Asian, Latin American, and European exchanges. In theory, this should have reduced risk, since economies don’t all perform the same way at the same time (think China and the U.S. over the past 10 years)—so the stocks and bonds of firms based in different markets shouldn’t, either.
Read more at Bloomberg .