North American funds

hyposmurf

As the markets arent doing that well in the US has anyone bought N American funds lately?Thought as they have declined that it may be a opportunity to purchase funds that seem to have declined and are now looking a steadier.Although the funds could decline further before they improve.Bad or good idea?Why?

Are the funds that have generally done poorly in the US,those that are linked to the sub prime lending market?

cloud_dog

Wrt your last point, sort of no, not really.

The sub-prime has (will) have two affects:

* The credit crunch caused compaines with exposure to it to retain / regain liquidity. The easiest way to do this was to liquidate assets (stocks etc) this caused a run on shares. It even caused companies with no direct exposure to it to maintain / obtain liquidty with a similar affect for that company (although not so painfull for them).

* Secondly, sub-prime has had a knock on affect, particularly in the US,whereby the willingness to lend has dminished and the cost of lending has increased (despite the recent Fed IR cut - although this will start to filter through and reduce IR)

The other problem you have with investing in the US is that it looks as though the Fed (US) appears quite happy to inflate their way out of problems. What this means to you is that the real value of the dollar against the pound (for example) will decrease, i.e. the value of your US investment to you will keep going down.

The devaluation of the $ will be good the the US at some point in the future as it makes what it produces cheaper and therefore more competitive and therefore the US balance of payments should improve, which will help the countries financial conditions and therefore peoples wealth - (thats the short version).

I think it is way too early to start investing the the US - there will be more negativity towards the $ going forward - however..........if you can only add small amounts of money on a monthly basis (for example) then it might be worth considering over a VERY long period of time, but you must expect the value of your investments to go down in the meantime.

cloud_dog