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Diversification Is The Key To Survival

The Big Idea

In New York this past week, Lief and I have met the retired Minister for Foreign Investment for Macedonia (more on this in a minute)…a friendly Greek selling old maps of his country on the street corner…an ambitious Mexican working hard to make a go of his new restaurant (Trece, on 13th Street…I highly recommend it)…and a Pakistani taxi driver who went well out of his way to make sure we made it to my Bloomberg interview on time.

Everywhere we’ve been across Manhattan these past several days, we’ve met people from all over the world…travelers, businesspeople, diplomats…

“In Panama, I’m always switching between Spanish and English,” Lief remarked one afternoon, “depending who I’m talking to. Here in New York I have no idea what language to speak.”

America’s melting pot…a city with one of the most diversified populations on the planet. That’s New York.

An appropriate place for me to be addressing what I see as the most important agenda of our day. No matter who you are and no matter where you are, I can tell you what you should be spending your time and energy doing, namely:

Diversifying.

“Kathleen, how can you be promoting the idea of Americans buying real estate in other countries when the whole world right now is looking to the United States for opportunity?” asked CNBC host Kelly Evans when she interviewed me Monday morning.

A whole lot of the world seems to be in a whole lot of trouble right now, but the United States as safest global investment haven? I don’t quite buy that. On the other hand, I’d agree for sure that, given the falls that some U.S. property markets have seen over the past five years, yes, indeed, these regions of the country can offer interesting opportunities for buying low.

Does that mean that whatever portion of your portfolio you want to put into real estate should go into U.S. real estate, full stop? No way.

Neither should whatever you’ve got go all in to Panama’s property market, say. That’s not diversification either.

And it’s not that everything you’ve got should go into real estate…though, as we’re reminded of the uncertainties and limitations associated with other investment options, from securities to precious metals, I’m more bullish on property as an asset class all the time. Invest in a second home on the shores of the Caribbean, and you could rent the place out when you’re not using it, all the while day dreaming about the seafront retirement you’ll enjoy there when that stage of life eventually rolls around. Buy a little farm down Uruguay way (Uruguay is one of the easiest places in the world to do this; its farmland inventory is organized in what amounts to a niche Multiple Listing Service) and you could lease it to a local farmer short term while preparing longer term to embrace finca life when you retire.

I don’t think there’s any denying that, in today’s world, the investment you want to hold, more sensible than any other, is real estate. Your global property portfolio could include real estate in the United States. However, I’ve spent the past week in Manhattan pounding the drum for diversification, including and especially geographic diversification. Whatever money you’ve got to invest, I’d suggest putting some significant portion of it into real estate. And at least some of that should be real estate outside your home country.

Real estate overseas is a chance to diversity not only investment class but also economy, government, politics, politicians, market cycles, inflation rates, currencies, and on and on.

In all the interviews I’ve done over the past week, one question has been asked more than any other, in short:

“Buy real estate overseas? Who could really do that? I mean…isn’t that risky? Too dangerous for the average investor?”

I’m an average investor. I started out in Baltimore, Maryland…an average town. I had less-than-average assets out of the gate. I’m telling you:

You can do this, too.

How can you be sure something won’t go wrong? You can’t. It will. There are risks, and, as with any kind of investing, nothing is guaranteed. Don’t let that deter you. What’s the option? To do nothing? To keep your assets, your retirement, and your future all at home, all in one place? Would that be safer or more prudent? No.

You must diversify, both your investments and your life. It’s a necessity of the world we’re living in.

Kathleen Peddicord

P.S. This is the big idea, of course, behind my new book, “How To Buy Real Estate Overseas.” If you haven’t bought your copy yet, I urge you to go here to do so now.

P.P.S. The retired Minister for Foreign Investment for Macedonia? Over breakfast yesterday morning, he told us about his country’s new invest-for-citizenship program. Lief is preparing a full report for subscribers to his Simon Letter. More on this private offshore advisory service here.

Continue Reading: Renting While Trying Out Different Retirement Options

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