Many investors only buy US-based stocks or funds because it’s comfortable to stick with the companies we know. But there are good reasons why you should consider broadening your horizons to other developed markets and maybe even emerging markets.
As investment advisor James Duronio of Covenant Capital Advisors points out, US stocks represent roughly half the world’s equity markets. “Investors who only invest in the United States could be missing out on half of the world’s investment opportunities.”
Not just that, but by adding international stocks to the mix you can reduce swings in your portfolio because you’ll be more diversified.
4 Tips For Getting Into the International Stocks Game
Here are four tips for adding international exposure to your investment portfolio.
1. Limit Foreign Investing to One or Two Funds
If you already have investments in US stocks, look for an international or foreign fund instead of a global fund. Global funds usually invest some of their portfolios into domestic stocks, while international funds typically only hold foreign stocks. If you buy a global fund, you may have more of your money in US stocks than you think.
Don’t bother buying too many funds. You won’t see much of a performance difference owning 20 different funds compared to owning one or two carefully chosen ones, but you will have many more funds to monitor. If you’re just starting off , invest in a single fund that follows or tries to beat a broad foreign stock index, such as the FTSE Global All Cap ex US index.
Before you buy any fund, check out the fund’s online fact sheet to learn how they invest.
2. Keep Costs Low
It’s not hard to choose a solid mutual fund, so don’t overpay for advice and services you don’t need.
Funds may deduct sales loads, trade commissions and ongoing management and possibly even marketing charges from the money you invest. Brokers may also layer on transaction fees and even wrap fees….