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TRUMP UNIVERSITY WEALTH BUILDING 101

Europe, Latin America). Plus, most foreign stock markets are more attrac-
tively priced than the U.S. market, with lower price/earnings ratios (stock
price divided by the company’s earnings). Often that discount is warranted,
for various reasons including superior political stability and accounting stand-
ards in the United States. But now we’re seeing more good foreign compa-
nies than ever before with superior growth and lower valuations than their
U.S. counterparts.
What’s more, there are now more excellent ways than ever to invest in
the rest of the world. For many years, mutual and closed-end funds were the
only practical ways to go. In recent years, exchange-traded funds (ETFs) that
invest all over the world have become popular.
Also an excellent alternative is American Depositary Receipts (ADRs).
An ADR represents a non-U.S. company’s publicly traded stock, yet it
trades on U.S. exchanges. Investing directly in individual stocks on foreign
exchanges has always been cumbersome and expensive (high trading com-
missions). Today several hundred actively traded ADRs are available to us,
and there is plenty of available information about them because foreign
companies have to follow many of our rules for accounting standards and

financial disclosure in order to meet the listing requirements of U.S.
exchanges.
For non-U.S. stocks, the style box system is less structured because of
differences in individual markets. But you can still distinguish between
large value companies that pay high dividends, say, and smaller, faster-
growing companies. Generally, the markets of western Europe are more
stable than those of the emerging markets (China, India, Latin America,
and so on).
Undeniably, there’s a lot to choose from out there. But this doesn’t mean
you should invest in a bit of everything. Instead, I advise you to spread your
investments appropriately among different types of stocks and equity funds,
as well as bonds and cash. By appropriately, I mean diversifying only among
the types of investments that are suitable for your situation.
For instance, if you won’t need any of your investment assets for many
years and are a growth investor, you don’t need to own bonds for income. If,
however, you’re a conservative investor, I would never advise you to invest
more than token amounts, if that, in small-company growth stocks or emerg-
ing markets stocks.
Then, depending on how involved you want to get, you might put higher
percentages of your portfolio into types of equities that are doing particularly
well, such as large-company growth stocks, mid-cap value stocks, European
blue chips and so on.

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