International Investing (2024)

FAQs

What is an international investment? ›

What is international investing? International investing is an investment strategy that involves selecting global investment instruments as part of an investment portfolio. People often invest internationally to expand diversification and distribute investment risk between markets and global companies.

Markets outside the United States don't always rise and fall at the same time as the domestic market, so owning pieces of both international and domestic securities can level out some of the volatility in your portfolio. This can spread out your portfolio's risk more than if you owned just domestic securities.

Investors can access foreign stocks via ADRs, GDRs, direct investing, mutual funds, ETFs, and MNCs. Buying foreign stocks allows investors to diversify their portfolio's risk, in addition to giving them exposure to the growth of other economies.

There are two main categories of international investment: portfolio investment and foreign direct investment (FDI).

Investors can purchase U.S.-listed foreign stocks that trade in the United States through a U.S. broker. Trading on foreign markets. A U.S. broker may be able to process an order for shares of a company that only trades on a foreign securities market.

Start by allocating 15% to 20% of your equity portfolio to foreign stocks. That's the percentage I typically maintain in the Vanguard portfolios. It's meaningful enough to make a difference in your overall returns, but not so much that it will ruin your portfolio when foreign markets temporarily fall out of favor.

Foreign large-growth and foreign large-value funds fill more specialized roles; we consider them “building blocks” that could make up as much as 15% to 40% of a portfolio's assets. Because of the higher risk inherent in emerging markets or region-specific funds, we recommend limiting them to 15% of assets or less.

Depending on your return objectives and risk tolerance, your international allocation should be 5-25% of your total stock market investments and the international weighting necessary for truly global exposure is likely to increase over time as global trends become even more entrenched.

Can Americans invest in other countries? ›

One way to diversify your portfolio is to put some of your money in overseas investments. Foreign markets may respond differently to economic conditions than U.S. markets. That means strong performance abroad may help to offset weak performance at home.

Opening a demat account with Indian brokers or foreign brokers enables investing in US stocks. Mutual funds and ETFs are alternative options for international stock investments, providing diversification benefits and exposure to global markets.

What Is the Safest Asset of All? The concept of the "safest investment" can vary depending on individual perspectives and economic contexts, but generally, cash and government bonds, particularly U.S. Treasury securities, are often considered among the safest investment options available.

An example would be McDonald's investing in an Asian country to increase the number of stores in the region. Here, a business enters a foreign economy to strengthen a part of its supply chain without changing its business in any way.

For example, you can prefer the US market for technology, Europe for engineering, and Australia for commodities. If you are interested in healthcare or pharmaceuticals, there are several options in the US and Europe. You can access multiple geographies through ETFs.

As mentioned above, an investor can make a foreign direct investment by expanding their business in a foreign country. Amazon opening a new headquarters in Vancouver, Canada would be an example of this.

Examples of foreign portfolio investments include stocks, bonds, mutual funds, exchange traded funds, American depositary receipts (ADRs), and global depositary receipts (GDRs). Foreign direct investment (FDI) refers to investments made by an individual or firm in one country in a business located in another country.