I’ve been writing about Freedom Investing since my first article. Countries are constantly in flux, and with all the noise of the markets, it is easy for the noise drown out the signal. I’ve often summarized the concept of Freedom investing with this simple statement:
Investing in countries high in economic freedom and low in debt and deficit boosts returns about four to five percent over the EAFE Index.
Because of the randomness of the markets, I am certain that at some point the set of countries with the most economic freedom will under-perform the EAFE index over some short period of time. Japan will do well or perhaps the PIGIGS (Portugal, Italy, Ireland, Greece and Spain) having been so under valued will rebound for some period of time. But not this past year.
It may be difficult to find cheer when the average country with economic freedom is down nearly 10% over the past 12 months, but they are still down 4.3% less than the EAFE index.
3 mos. 6mos. 12 mos. Index (returns through 6/30/2012) -4.89% +7.88% -8.16% MSCI Hong Kong Index -3.78% +14.77% -7.09% MSCI Singapore Index -5.07% +3.42% -11.29% MSCI Australia Index -6.25% +6.81% -2.94% MSCI New Zealand Index -6.08% +3.36% -11.20% MSCI Switzerland Index -7.75% -1.87% -16.49% MSCI Canada Index -5.64% +5.73% -9.53% Average Freedom -7.13% +2.96% -13.83% MSCI EAFE Index +1.49% +2.77% +4.30% Freedom Bonus over the EAFE Index
Even in the midst of a global market drop, countries with the most economic freedom have dropped less.
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