We have been advocating Freedom Investing since 2004. Every year, the Heritage Foundation evaluates all the world’s countries using their Index of Economic Freedom, where a high score correlates to nearly every positive measure of a country. We then use this ranking and efficient frontier analysis to craft our Foreign Stock investment strategy that we call “Freedom Investing.”
This article is part of my series where I review how Freedom Investing performs for the quarter. In this analysis, I have used the actual products we are investing in rebalanced monthly to our static asset allocation targets with returns ending June 30, 2021. This analysis does not reflect our dynamic tilt or our individual stock foreign health care strategy, both of which we implement in client portfolios.
For benchmarks, I have used actual products as comparison. The EAFE (EFA) should be compared to Developed Freedom Investing, Emerging Market (VWO) should be compared to Emerging Market Freedom Investing, and the All World ex-US (ACWX) should be compared to the Overall Freedom Investing.
Last quarter, we saw that in 1-year returns ending March 31, 2021, Developed Freedom Investing had a +2.85% advantage, Emerging Market Freedom Investing had a +1.14% advantage, and Overall Freedom Investing had a +2.21% advantage.
This quarter, we saw that in 1-year returns ending June 30, 2021, Developed Freedom Investing had a +0.74% advantage, Emerging Market Freedom Investing had a -0.64% disadvantage, and Overall Freedom Investing had a -0.40% disadvantage.
You’ll also see this quarter that, even though Emerging Markets underperformed, the All World ex-US (which includes emerging markets) saw an advantage over the EAFE. This is likely because the All-World ex-US currently allocates 7.03% to Canada, which performed very well this past quarter, while the EAFE does not include Canada.
|iShares MSCI EAFE ETF (Market Return)||EFA||5.38%||9.59%||26.84%||32.63%|
|Developed Freedom Investing||6.31%||9.55%||28.05%||33.37%|
|Emerging Markets Freedom Investing||3.95%||9.21%||28.37%||39.58%|
|Overall Freedom Investing||5.43%||9.26%||27.98%||35.28%|
|iShares MSCI ACWI ex US ETF (Market Return)||ACWX||5.32%||9.57%||27.57%||35.68%|
Photo by Joey Kyber on Unsplash. Return data gathered from Morningstar Advisor Workstation.