Money & Investing – Banks.com

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For years, China’s main foreign investment has been U.S. government debt. Indeed, China is the largest hold of U.S. Treasury debt, and that has been one of the reasons that the U.S. makes political concessions to China – even while posturing before the American people about being tough on the upcoming economic superpower. And now it looks as though China has enough from its investments and exports (and growing foreign exchange reserves) to start diversifying. China plans to invest heavily in Europe — and not just in government debt. China is ready to take a few more risks now that other Western assets are such great bargains.

What the average investor can learn from China

There are 3 main investing lessons that you can learn from China’s current and expected asset shopping spree:

1. Diversify. Diversification is a good idea. As far as foreign investment goes, China has mostly stuck with U.S. Treasuries until now. But it is a good idea to vary the risk level as well as the types of investments. China is looking into energy and natural resource investments and equities to flesh out its bond holdings. And China is also diversifying to different countries. If (heaven forbid) the U.S. actually defaults on its debt, China will be reasonably covered. Do you have enough diversity in your investment porfolio to get you through tough times if some of your investments fail?
2. Buy when you can get a good deal on investments. China is buying now, when Western assets are cheap. Equities, projects and government debt around the world can be had at bargain prices. China is following the classic investment rule: “buy low, sell high.” Far from being the time to sell at a loss, now is the time to buy so that you can sell for large profits later.
3. Have an investment plan. China isn’t just willy-nilly buying stuff up. There is a plan there. China is looking at the needs of the country — especially when it comes to the energy investments — and its own portfolio. China is considering where its investments will yield the best chance of solid returns. On top of this, China has been carefully and competently managing its own financial resources for years.

We may not like that China is the up and coming economic superpower, but we do have a lot that can be learned from the way China does its investing.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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