International Stock Investment Strategy
Investing outside of your home country can make a lot of sense. For one thing, international investing helps you build a more diversified portfolio, helping you spread out your risk and build wealth for the long term. As an investor you have a number of ways to play the international market, from individual multi-national stocks and foreign firms to mutual funds and exchange traded funds.
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Individual Stocks
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If you need to add international exposure to your portfolio, you can purchase stock of individual companies headquartered in foreign countries. You can also purchase the stocks of large multi-national corporations that do business in both your home country and other countries around the world. As with any individual stock, buying individual stocks carries risks, so it is important to choose your investments wisely and do plenty of research before jumping in.
International Mutual Funds
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Most mutual fund companies offer a number of different international mutual fund options, including widely diversified index funds that invest entirely outside the United States; sector funds that invest in a particular region or a specific country; and growth funds that focus on large multi-national companies that does the majority of its business overseas. When evaluating your mutual fund options it is important to review the prospectus carefully to assess the performance of the fund and the expenses associated with each investment option.
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Exchange-traded Funds
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Exchange-traded funds work much like mutual funds in that they hold a large number of different companies. But the key difference between a traditional mutual fund and an exchange traded fund is, the way it is priced. While a mutual fund is priced once at the end of each day, the price of an exchange traded fund fluctuates throughout the day, the same way an individual stock does. You can purchase an exchange-traded fund through your brokerage account, and you can choose an exchange-traded fund that is broadly diversified, or one that focuses on a specific part of the world, or even one that focuses on a specific country.
Long-term Strategy
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It is important to understand that the stock market is a long-term investment, and that holds true for international stock investing as well. While you may get lucky and make a quick buck on an individual foreign company or an international mutual fund, for the most part you should have a long-term time horizon when investing in the international market. That means never invest with money you expect to need within the next five years. It also means not focusing on the day-to-day gyrations of the stock market and focus instead on long-term returns.
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References
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