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The Loyal Opposition

Sigma Investment Counselors

August 28, 2013

According to Wikipedia “In parliamentary systems of government, the term loyal opposition is applied collectively to the opposition parties in the legislature that indicate that the non-governing parties may oppose the actions of the sitting cabinet while remaining loyal to the source of the government’s power.” This suggests that the majority party also owes a measure of respect and consideration to the minority party or parties.

This should be an important consideration for investors, particularly when evaluating opportunities in foreign countries.

Successful investing is generally thought to require a government that respects minority rights, operates under the rule of law and provides for reliable safeguards to capital.

Investors should be cautious in countries where elections are viewed as a “winner takes all” event, where the winning party moves to jail the opposition, rewrite the constitution, pack the courts and/or shut down independent media.

“One man, one vote, one time” is not exactly a democracy.

The foregoing notwithstanding, there are probably significant growth opportunities in a broad range of emerging and less developed markets. Pursuit of these probably involves greater risk and may require more extensive research than investments in the US. Any investment involves company risk. Investing overseas also includes country and currency risk.

Here at Sigma, we have elected to participate in the potential for greater growth outside the US through the use of diversified ETFs. This provides access to attractive markets while mitigate some of the risk through diversification.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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