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Why should investors invest in international stocks? Many
United States investors have successfully used, successfully,
the US stock markets to gain the return on investments they
are looking for. Yet, now, more than ever, there are some
ideal international markets that are appealing in their own
right. As someone looking for a way to get a sizable return
on your investments, these stock markets may be just the right
way to go. International stocks offer several benefits that
the US stock market is currently not providing. Here is a
closer look.
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Does your investment strategy have you buying both
large and small cap stocks? If so, the international
market is somewhere you should be looking for opportunities.
As you will find if you stay active in investing for
some time, all markets are cyclical. There is little
chance that you will know when these changes will happen,
in any market. Yet, if you diversify your portfolio
enough, and include a number of different international
markets in the mix, you will boost your chances of avoiding
turmoil.
For example, most investors realize the importance
of diversifying their portfolio to include a number
of different asset classes. As the market moves, one
asset may fall, but at the same time, another may rise.
In turn, these markets are both not going to yield a
profit, but they will allow you to ride out the ups
and downs without losses that are too heavy. The same
is true with geographic classes.
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There is no doubt that many American investors have what
is called a "home country bias", favoring investing
in the country they live in, are loyal to and want to see
do well. If you set that aside-though, there are many reasons
why you should invest in international stocks.
Why Invest?
International stocks offer several key benefits, but perhaps
it is hard to see this at first. Here are some figures that
may show you just how beneficial these investments can be
to your portfolio.
- There is about one half of the world's market capitalization
located outside this country's borders. In other terms,
there is plenty to be had in the global marketplace.
- Did you know that only about 5 percent of the world's
population lives in the US? That means that 95 percent live
in other countries. Take a closer look and you will notice
that some 71 percent of the world's GDP is produced outside
of the US.
- In international stock markets, there are some 49 countries
where you can find publicly traded investment securities.
There are some 37,000 companies that are listed to be traded
globally. On the other hand, in the US, there are a mere
5000 companies from which to select.
Now, take an even closer look
and you will notice one of the main reasons you should invest
internationally: some of the world's largest, most stable
and most likely to explode stocks are located outside our
country and are traded there. Companies like these are great
investments for just about anyone.
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