Why Invest Internationally?

Because international investment returns can move in a different direction than U.S. market returns, investing internationally could help mitigate against some of the risks associated with a U.S.-based portfolio.

Just like the adage about not putting all of your eggs in one basket, investing overseas may spread your portfolio’s risk.

Crossing risky waters

As with any investment, international opportunities can present risk and unique concerns. Although emerging markets can offer stronger growth opportunities, they are often more volatile than developed markets. As examples of a couple kinds of risks when considering international investments:

Political risk. Many parts of the world are undergoing immense changes, including the Middle East, parts of Asia, and Latin America. Investors in developed countries also have to be aware of potential political risks.

Currency / liquidity risk. Different parts of the globe experience trouble with their currencies as a result of events investors can’t foresee or control. Investing overseas requires you to closely follow news and trends from various regions and keep a keen eye on potential currency fluctuations.

The percentage of your portfolio you invest internationally will depend on your risk tolerance and your long-term investment plan. An experienced financial professional can help you decide what’s right for you.

ETFs and Mutual Funds

Exchange-traded funds (ETFs) and mutual funds are two popular options for many investors looking overseas for opportunities.

ETFs are traded on a stock exchange, either in the U.S. or in other countries and regions. ETFs are usually tied to an index of securities such as equities, bonds, and commodities. They are attractive to investors for their relatively low and stable costs, tax efficiency, and the ability to trade them like individual stocks.

ETFs differ from mutual funds, which pool money together from thousands of small investors to buy larger quantities of stocks, bonds, or other securities with those funds. The term “mutual fund” is popular in the U.S. and Canada, but similar tools in other regions may have different names. For example, in the United Kingdom, the term is open-ended investment company (OEIC); in Western Europe this tool is referred to as a SICAV, which roughly translates to Collective Investment Scheme Common.

Empower yourself with financial knowledge

We’re committed to your financial success. Here you’ll find a wide range of helpful information, interactive tools, practical strategies, and more — all designed to help you increase your financial literacy and reach your financial goals.

My Financial Guide