The Independent Market Observer | Outlook. Opinion. Insight.

A Week in Budapest

Written by Brad McMillan, CFA®, CFP® | May 3, 2017 5:37:52 PM

I’m in Budapest, Hungary, this week at the Commonwealth Leaders Conference. As always, it's great to spend time with such a fantastic group of financial advisors. It is an enormous privilege to be here.

Broadening our U.S. perspective

The setting of the conference is especially interesting this year. Located in the middle of Europe, Hungary is very different from the surrounding countries, with a long and harsh backstory. In more recent history, it was under Soviet control for decades after a Nazi occupation. Traveling here offers the chance to see a very different world and to reflect on how lucky we Americans are.

So, gratitude is the first thing on my mind this morning—gratitude for where I am, for who I’m with, and for where I come from (and can head home to). I have written about gratitude many times before, and it remains at the core of my effort to live a happy and successful life.

The second thing on my mind is how wrong I was about Budapest. For some reason, I had expected it to be a much grayer, less developed place, a post-Soviet city of drab concrete. There is some of that, but my overall impression is of a delightful European capital with wide, green boulevards, wonderful architecture, and great food. It’s been 28 years since the fall of the Berlin Wall, and Budapest has fully joined Europe, at least from a visitor’s perspective.

Though I’m incredibly glad to be an American, the U.S. isn’t the only country that is growing and succeeding—a fact that really comes into focus when you travel abroad. Of course, as an American, it can be hard to see this sometimes. Here in the U.S., even if you spend all your time looking at economics and markets, as I do, it’s often difficult to grasp what’s happening on the ground.

International markets still worthwhile

From an investment perspective, this trip is a good reminder that it makes sense to diversify internationally. Given the strong performance of the U.S. economy and stock markets over the past several years, many of us (myself included) have increased our exposure to U.S. investments. Given the headlines' constant focus on problems elsewhere in the world, the U.S. seems both less risky and more rewarding than anywhere else.

And yet, when you actually leave the U.S., you can see that things are much better on the ground than they might appear from your hometown. When you take a closer look at the stats, you notice that international growth is actually beating U.S. growth, and that is starting to translate into corporate earnings and stock market results. In other words, even as things are good here, they are better abroad in many cases—and likely to get better yet.

From here in Budapest, Europe looks much better than it did in Boston, and the numbers support that. When you invest, it is important to get a real perspective, rather than simply relying on the headlines.

One of the best ways to do that is to look at results over time instead of trading on current perceptions. As I’ve said many times, it’s all about balanced allocations, regular rebalancing, and standard investment management theory. It really does work, over time, because it cuts out a lot of the noise. Traveling the world is great, but investors can get powerful insights just by using these methods in their portfolios.

  -