Tel Aviv indices may be around all-time peaks, the shekel at its best levels in years and the local economy on the receiving end of repeated praise for its resiliency in the wake of last summer's war in Lebanon, but that doesn't stop Aaron Leitner from reiterating his "go global" mantra. "Over time, the benefits of diversifying investments outside of Israel has grown," says the global investment strategist at Ramat Gan-based portfolio management company Tandem Capital. "Institutional investors are investing more and more of their money outside of Israel and so is the Israeli household. That being said, until today, the Israeli household still has a profile very similar to the American household in that only about 15 percent of their investments are outside their home country. That "home bias" is prolific, he says, noting that the British are very close to the Americans, while the Europeans are around 25%-invested outside their region. The Dutch, with about 80% of their investments outside their home markets, are the most outside-focused in the developed world, he claims. Israelis, especially, should be investing globally, according to Leitner, because of their heavy exposure to the shekel, given that their salaries, pension funds and homes are all exposed to local market risk. "If you invest in Israel it's a single currency exposure, but if you invest globally you're in multiple currencies around the world and your currency risk is muted," he says, adding that investing in Israel also puts geopolitical risk into the mix. So where should investors be putting their money in 2007? According to Leitner, emerging markets need to be in every equity investor's portfolio. "As long as there is economic growth, I think you will find that emerging markets equities will continue to provide attractive returns. There will be shifts from time-to-time in what parts of the world will move ahead and others will pause," he says, but notes that it's "very impressive" to see where the emerging markets are going right now. While he says US equity markets in 2006 did way better than in 2005, he called Japan a "big disappointment" as he had expected better growth in its economy and bigger contributions to global portfolios. Having recently reduced the firm's exposure to Japan, he says that he sees slow growth in its economy. He also believes the US is headed for tamer growth, translating into less upside for US equities. China, India, Brazil, Mexico - Leitner finds favor in them all but he's especially bullish on Vietnam. "We see Vietnam as the India-China story five years ago," he says, citing among other things its population with the highest per capita level of education in the region; competitively low cost of labor, its impending acceptance into the the World Trade Organization; and structural reforms in its capital market. These reforms have resulted in growing foreign investor activity. "It's a small market cap country, with rapid development and they've also experienced a return of Vietnamese or children of Vietnamese refugees who are mostly US-educated. Many of them are from Silicon Valley experienced VC funds. Many have worked in the big-five CPA firms. They are coming back to Vietnam, helping the economy grow and creating a generation of newfound wealth. The firm manages the added risk involved in investing in emerging markets by always being anchored in the developed countries, Leitner stresses. As for general risks, Leitner sees the situation in Iran and global terrorism as political risks with obvious economic implications. Meanwhile, for a total return, in most parts of the world, he believes equities are more attractive than bonds on a risk-adjusted basis. He also recommends global real estate. "For small investors there are ways to invest in global real estate markets through either real estate mutual funds or REITS [real estate investment trusts]. That's what we would advise because they offer liquidity, lack the exposure you might have with directly investing in real estate, but still offer the ability to diversify into this asset class," he says. He notes, however, that investing in US real estate at this point should be limited to the commercial sector and one should maintain a healthy global diversification. "You should never be 100%-weighted in one direction," he advises. "Hedge against making the wrong bet through proper asset allocation." Watch for Aaron Leitner's biweekly column "Your Money Matters," coming soon to The Jerusalem Post.