foreign investing

Mark Mobius, a fixture in international investing from his perch at the Franklin Templeton mutual fund company, will retire this month after three decades of leading American investors to foreign shores.

Like the founder of Franklin Templeton, the late John Templeton, Mobius followed a simple but difficult-to-replicate investment strategy: Be there first.

Mobius is an icon of emerging-market investing, opening entire continents to U.S. investors. Shaved bald, always dapper in a tropical suit and tie, Mobius traveled constantly from his base in Singapore to find new ways to invest money abroad.

His strategy worked well for decades. Those who follow my writing here and know my firm, Rebalance, know that I do not believe in stock picking at all. Index funds truly are the way to retire with more.

Nothing has changed about my views, but I do appreciate a man like Mobius because he changed the way retirement investors think about foreign investing — for the better.

If you read history of the Templeton Funds you soon learn the secret of success for the company’s founder, John Templeton. As World War II began, the young Tennessean bought shares on the cheap, even borrowing to buy more.

Templeton did not worry about which stocks to buy. Some of the firms he invested in went under. But the ones that rose from the ashes of war prospered and made him rich. He repeated his success years later, buying stocks in Japan while prices were low.

Templeton later hired Mobius, who repeated Templeton’s ideas about foreign investing in places such as Russia and Thailand during the Asian financial crisis of 1997. When panic ensues, prices fall. For a value investor with nerves of steel, it’s time to buy.

This might sound like an endorsement of active investment. It’s not. Extremely few of us have the ability to be in the right place at the right time, like the young Templeton in the late 1930s or Mobius in Asia 20 years ago.

Virtually none of us spend hundreds of days a year jetting around the planet to inspect factories, as Mobius did for many years. As Mobius himself noted in a 1999 book, global investing meant he had no family life, no home, no stability at all — but no regrets.

A Global Perspective

Yet Mobius did do something extremely important for all investors today, creating a legacy that will live on forever. He effectively ended what financial behavior theorists refer to as “home bias.”

Home bias is the overwhelming urge to buy stocks from your own country. We all fall for this, regardless of nationality. Indian investors own too many shares of Indian companies. British investors favor UK stocks, and so on.

Yet we know that diversification is a major driver of both growth and stability for the retirement investor. That means owning entire markets through index funds and owning the world via low-cost index funds.

Getting over home bias is an important goal for investors and their advisors. Too many retirement investors sit on a small number of large U.S. stocks because they think they understand those companies. Often that includes stock in their own employer.

Yet research shows that owning stock broadly across the entire economy — not just stocks of a few large companies — is a far better provider of stable, long-term gains. Adding foreign stock index funds to a thoughtful portfolio significantly increases that powerful diversification effect.

Mobius himself sees the writing on the wall, telling Bloomberg News in 2016 that the investment field he pioneered is no longer the easy pickings of decades ago. He predicted that high-fee funds like his would not be able to keep up with low-cost diversification via international index funds.

“When we started out, we were the only game in town — we could revel in being exclusive and have clients come to us and pay the fees we were asking for,” Mobius said.

“Now there are hundreds of funds in emerging markets, including ETFs. We have to either really perform better so we can justify the fees, or lower the fees.”

That might sound like defeat, but I prefer to thank Mobius for what will no doubt be his ultimate contribution to investing: Opening the world to ordinary Americans and working to demystify foreign investment ownership.

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