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Plan Well, Retire Well

Saving and investing your money

Global Balance in Your Portfolio

I am writing this from Beijing, China where I am traveling with my 15-year old daughter, Annie. I travel to India fairly often because I am doing research there and India and China share the characteristic of being large economies with significant economic growth, particularly over the past 10 or so years. China has experienced the higher rate of economic growth and it reports official figures of annual growth rates in its economy (measured by Gross Domestic Product) of about 10 percent over the last decade. Some of the positive sides of this dramatic growth have been the establishment of a urban middle class in China that is becoming a huge market for consumer goods and the lifting of many millions of people, especially the rural poor who have migrated to the cities in search of jobs in the manufacturing and service sectors. On the negative side, China faces some significant challenges in adapting its institutions, especially its legal and governance frameworks, to the realities of its market-based economic activity. Additionally, on the environmental front the water situation and the air quality situations look like they might put a break on further growth.

Being here in China and seeing first hand the dynamism in the economy and the aspirations displayed by the Chinese reinforces the question of how is the international economy reflected in a person's retirement and investment strategy. While many people may not allocate a portion of their funds directly to international activities, through our investments in major US companies we gain an exposure to these markets. For example here in China I see Buick cars on the road (not many compared to the Hyundais though) and in India, US financial service firms are working to establish a foothold in a market that is only recently opening up to outside firms. An investor can also put a portion of her portfolio in a dedicated international fund, and while advisors vary in the recommended levels, it is common to see allocations in the 5 - 10 percent range for moderately risk averse long term investors. Having some exposure to the international market can broaden a person's portfolio and add an additional dimension of diversification to the allocation mix.

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