Investing in both U.S. and foreign markets can be a smart move for many investors. Here are four things to know about adding international investments to your portfolio.
Investing internationally can help diversify your portfolio.
Because U.S. and foreign markets perform differently at times, adding foreign investments to a portfolio of U.S. investments may help reduce the portfolio’s volatility. For example, if U.S. stocks are down, stocks in another part of the world may be performing better, helping to lessen the impact of the declining U.S. stocks on your portfolio’s overall return.
Investing internationally offers the potential for growth.
Investing in companies outside of our boarders offers you the opportunity to participate in markets that may be growing faster than U.S. markets.
Mutual funds and ETFs are a convenient way to invest internationally.
International mutual funds may hold hundreds or even thousands of foreign securities, making it possible for you to gain broad exposure to international markets with just a few mutual funds.
There are a wide variety of international mutual funds available. Some include securities from many parts of the world while others narrow their focus to one area of the world or to emerging markets, such as China, India, and Brazil.
You can also invest internationally with exchange-traded funds (ETFs) that track the performance of foreign market indexes.
Investing in individual foreign companies is also generally an option.
Many foreign-based companies trade on U.S. exchanges. But instead of shares of stock being traded, it is typically American Depository Receipts (ADRs). Each ADR represents ownership of a specific number of shares in a foreign company. The benefits of ADRs are that they are quoted in U.S. dollars, dividends are paid in U.S. dollars, and shareholder communications are in English.
If you are looking to diversify your portfolio internationally, please consult with us. With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Our approach is to provide clarity and calm amidst the chaos. Where there is uncertainty, we look for facts. We call our approach evidence-based investing. Call us today at 802-878-2731 to schedule a strategy session and begin building your road map to financial success.
Article published in May 2021 edition of Eye on Money. If you would like to be added to our mail list please email [email protected].