Market Update for May:
Why do we have to go and
make things so complicated?

I have often written about sectors and those that I favor over those I do not, such as consumer staples over energy. Geographical locations are also a factor for me, although identifying these specific areas is difficult. Last month’s results demonstrate this dynamic: the Nikkei in Japan is flying, having had its best month in two and a half years, breaking the 30,000 mark for the first time. Large foreign investment is reportedly behind this growth. And while the S&P in the US was flat, the UK was down, due mainly to being behind with its fight against inflation.

The differences between similar geographical areas should discourage investors from trying to be too cute with asset and area selection. If you look at the last five years, investing in an ETF that focused on the Denmark market would have yielded 11.5% per annum, the top performing country. Yet neighboring Norway, which may seem similar, was down 2.7% for the same period. In Asia, Taiwan was a top performing market with an annual return of 10.5%, while China was down 9%.

It’s often true that people are successful because they are able to make things simple. This concept holds true in investing. Global brands such as Proctor and Gamble, Unilever and Nestle sell their products in almost every country in the world, which allows investors to avoid the geographical location risk. Regardless of what is going on politically, people still need to eat, drink, wash, etc.