Goodall Goes Global

04/15/2005 12:00 am EST


Leonard Goodall

Co-Editor, No-Load Portfolios

Despite concerns over oil and interest rates, Leonard Goodall, editor of No-Load Portfolios, continues to recommend that long term investors continue to build investment positions "gradually and systematically." Here are two of his recent ideas, offering global exposure.

"Oil and interest rates are the primary factors putting downward pressure on the markets. Yet, even with these problems, the overall economy continues to be in rather good shape. Corporate profits for the S&P 500 were up 9.3% in the first quarter. This is below the 20% profit increase of last year’s first quarter, but it still shows good growth. The p/e ratio for the S&P is now about 20, a little above the historic average of 16-17, but down from the 23 figure of a year ago. With a 9-10% increase in profits this year, we don’t see this p/e level as a problem. If you have money you will need in the next two or three years, we suggest you keep it in a money market fund, short-term bond fund, or CD. With the current higher interest rates, these are now more attractive. If you have longer-term money to invest, we would invest it gradually and systematically into the market.

"We believe most investors should have some foreign holdings in their portfolios. Fidelity Latin America Fund (FLATX) has been volatile through the years, but it is one of the more established and stable funds invested in this region. The fund has gained 12% so far this year, and rose 41% in 2004 and 65% in 2003. (We caution, however, that the fund lost 17%, 6%, and 21% in 2000-2002.) If the fund has a weakness, it is its concentration in just two countries, Brazil and Mexico. However, that is a valid representation of the economy of Central and South America. Fidelity is a highly respected fund company, and if you want just one Latin American fund in your portfolio, take a good look at this one.

"T. Rowe Price International Bond (RPIBX ) is volatile because it has both interest rate risk and foreign currency risk. The decline in value of the US dollar helps the fund, so your view of whether that trend will continue should influence your decision to buy this fund. Its largest current holdings are in the bonds of Japan, Spain, Italy, and France. If you can tolerate some volatility in return for a chance at higher than average risk, you may want to include this fund in your portfolio, as it provides a good way to add diversification and income to a general portfolio."

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