The World According to Milton Balbuena

Recently I caught up with Milton Balbuena of Contango Capital Advisors in Berkeley, Calif. Contango is a wealth management firm that services high-net worth clients as well as many entrepreneurs who own small- and medium-sized companies.

Balbuena sees some serious volatility ahead for the global markets, which is why he is currently rethinking his approach to international investing. Balbuena plans shift his clients' cash to more defensive international money managers. He wouldn't name names, but he says he expects the newcomers to invest in a style similar to Third Avenue Value. In addition, he also plans to move more money into country-specific mutual funds and ETFs and out of diversified portfolios.

Overall, he says most investors are seriously underweighted when it comes to foreign equities. "I think you need to look at the world market capitalization," he says. "The U.S. is responsible for 40% to 50% of the world's market-cap, which means investors should only have 40% to 50% of their assets invested in U.S. stocks."

Putting half of your portfolio overseas sounds pretty aggressive to me, but I get where he is coming from.

What kind of exposure to foreign stocks seems reasonable--as well as financially sound--to you?

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