September 05, 2014
Investing globally may help diversify your portfolio because it can potentially increase your returns or reduce risk — or both.
“The main potential advantage to investing globally is getting exposure to different economies, which often are not in sync with one another,” says Roosevelt Bowman, Senior Fixed Income Analyst for U.S. Bank Wealth Management. “Whether you buy stocks, bonds or other assets, you may be able to ease the risk of a weak economy by spreading those investments globally.”
Of course, investing outside the U.S. adds a layer of complexity to the decision-making process. “When investing internationally, you’re making two decisions: first, whether the investment has potential, and second, expectations as to how the underlying currency in that country will fare in the future in relation to the dollar,” says John De Clue, Chief Investment Officer for The Private Client Reserve.
Both factors can shift the value proposition of an investment up or down. Understanding currency movements may help inform your investment decisions. Keep in mind that international investing involves special risks such as foreign taxation, currency risks, risks associated with possible differences in financial standards, and other risks associated with future political and economic developments.