How to Instantly Diversify Your Portfolio by 70%

Many investors don't realize they're only doing 30% of the "work" necessary to get the most out of their investments. They're doing this by simply ignoring companies that operate outside of the United States.

This article published with permission from InvestmentU.com.

Imagine if throughout your working career you only did what you were supposed to 30% of the time. Would you have been showered with raises, bonuses and praise? Or do you think you would’ve been left underpaid, unappreciated and unsuccessful?

The likely outcome is the latter. It’s obvious. Yet many investors don’t realize they’re making a similar mistake when it comes to their financial portfolio. That is, they’re only doing 30% of the “work” necessary to get the most out of their investments.

They’re doing this by simply ignoring companies that operate outside of the United States. It’s a global world … and it’s not going away

According to The World Bank, the U.S. accounts for 30% of the world’s total equity market cap.

Granted, that’s a huge chunk for any one nation. But it also means 70% of the all the publicly traded opportunities around the world are found outside of America.

And that’s not all…

  • The growth rate in emerging markets is about four times faster than that of the United States.
  • By 2030, 93% of the world’s middle class will reside in emerging nations.
  • According to Ameriprise Financial, emerging market stocks returned more than 13% a year over the past decade, compared with less than 1% for U.S. stocks.

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Investment U

The point is: In order to have a truly diversified portfolio, you include a healthy dose of foreign investments. At , our Asset Allocation Model suggests dedicating 30% of your total portfolio to foreign stocks.

So where can you look for great opportunities to profit?

One place to consider — that isn’t on everyone’s radar yet — is one of Latin America’s fastest-growing global markets.

I’m talking about Colombia…

The next “it” emerging market

Believe it or not, after years of drug violence, The World Bank says Colombia is the most secure country in all of Latin America to do business.

In fact, foreign investment has more than quadrupled there since 2002. It even hit a record all-time high in January. And it looks like this is just going to be the very beginning.

On Thursday, Colombia and China reached an agreement that will bolster its exports of coal and oil to Asia. If you didn’t know, Colombia is already the third largest exporter of oil to America. Now that it’s going to start increasing its role in Asia, too, oil companies in Colombia are propped to enjoy a long period of prosperity.

Investors can take advantage of this enormous opportunity by investing in a company like Ecopetrol S.A. (NYSE: EC). Ecopetrol is Colombia’s largest oil and gas company. With a market cap of $113 billion, it conveniently trades directly on the NYSE. It even has a solid dividend yield of 3.3%.

What’s more, the company is currently experiencing quarterly revenue growth of 25%. It’s operating and profit margins are sitting pretty at 24% and 37% respectively. And its stock price has been on a tear … up 45% so far this year.

But no matter whether you’re into opportunities in South America, Asia or anywhere else, just remember to expose your portfolio to emerging markets and foreign investments.

You won’t regret it.

Mike Kapsch is part of the research team at InvestmentU.com. See more articles by Mike here.