Investing Tax Free

International Investing

A way to invest money, especially when your home market is doing bad compared to the international markets, is to invest in international investments. However, many investors stay away from international investing even though sometimes, it is the best way to invest money.

Why international investing?

You are already buying goods from international companies, but you refuse to benefit when those international companies do well??

In a borderless global economy, American consumers buy electronics from Asia, home goods from Europe, and foods from Latin America. But when it comes to picking and investing in stocks, bonds, or mutual funds, Americans almost always invest solely in U.S. companies when there are so many reasons for international investing.

According to the Profit Sharing / 401k Council of America, just 2.9% of the assets in 401k plans - the primary investing vehicle for many Americans - are invested in international equities. The reluctance of Americans to invest in foreign companies and international investments stands in sharp contrast to the willingness of American consumers to buy products from international companies.

Look at it this way: You'll support an international company with your consumer dollars but then refuse to participate in the growth of this international company by choosing no to international investing.

This failure to think globally when it comes to international investing represents a series of missed opportunities for investors:

  • the opportunity to invest in some of the world's best and most profitable companies (many of those are international investing)
  • the opportunity to potentially achieve better returns (by international investing)
  • the opportunity to bring greater diversification to your portfolio (using international investing to diversify your portfolio)

American consumers may be unwilling to invest abroad. But a look at international investing shows that there are many compelling reasons to consider adding more overseas exposure to your portfolio. The US vs International Returns chart shows that there are many countries whose investments have consistently outperformed US investments. Keep in mind that international investing in foreign and/or emerging markets securities involved risks relating to interest rates, currency exchange rates, economic, and political conditions. The investments you choose should correspond to your financial needs, goals, and risk tolerance.