Foreign Investing - US Investors Still Missing Out?

Investors are still too slowly realizing what scientists have long pointed out - by foreign stocks to your portfolio will , in the long term , increase your returns and lower the overall risk of your portfolio.
U.S. investors comprehensive foreign investment are both realists and optimists. They are optimistic that the chances are better off when they have invested at least some of their hard earned money in countries with higher growth rates than here. You can not help , but when they see realists a new record trade deficit of the United States, almost every month , as the figures are released by the Treasury . Until we get our fiscal and trade deficits under control, while the short-term rallies are very likely not change the long-term weakness of the U.S. dollar for the foreseeable future is likely.
The problem is that most U.S. investors and their advisers , have not had the time , opportunity or inclination to educate and familiar with foreign investment , busy as they are just right with its own home market.
This lack of familiarity and comfort is set for the average investor from the overseas markets. It has encouraged use relatively expensive actively managed mutual funds many investors . Available to the investor as a financial plan , the broker has to pay - These funds are often with additional agendas , sold by a broker or advisor. Unfortunately, these actively managed funds are often disappointing results. In large part, this is because actively managed funds have relatively high operating costs , but it is also because international fund managers, like their domestic counterparts find it so hard to benchmark outperformance sustainable ... and of course private investors just love to chase historical performance !
Many wealthy investors do not have any single foreign investments in general. The New York Stock Exchange , a survey of U.S. holders of foreign shares in 2000. The survey found that almost one in ten investors , the shares held directly , also gave a foreign stock exchanges of any kind. In my professional experience , this was foreign exchanges more often than not a Canadian stock. Very few investors really benefit from genuine regional economic and currency diversification of their direct participation in the average.
Most investors still do not realize how easy it has become to trade and follow foreign securities .
The development of low-cost exchange-traded funds ( " ETFs " ) , who specializes in tracking the local indices of different geographical regions or individual countries , has led to the U.S. investor has now ETFs a real alternative to these expensive active managed mutual funds
A convenient way for a U.S. investor to take a direct investment in a single foreign company is when you have a form of security called American Depositary Receipt , "ADR" use . These were first developed way back in the 1920s . ADRs are U.S. securities traded on U.S. markets , and although most of them trade on the Pink Sheets , there are still a few hundred from which to choose that trade on the New York Stock Exchange or the NASDAQ , including dozens of well-known names such as Nokia , Toyota, Sony and Shell.
The great progress made ​​in recent years, access to information , transaction ease , confidence and convenience in Internet , does everything you can now follow the fortunes and trade , the ADRs of an Australian bank or a Mexican bank , just as easily as you can use a U.S. bank ... and in your regular U.S. brokerage account to do so.
There are disadvantages to foreign investment . The possibilities opened by the Internet itself tends to lead to stronger markets correlate with each other , the . Utility of the geographical distribution of investments Accounting, reporting and regulatory standards of many foreign exchange markets are often not as high as we take for granted here - although all of these are rapidly changing for the better. And of course these foreign nations are sovereign states with different degrees of political stability , and often with a different political outlook than would largely accepted here .
The time to buy is on overseas markets if they despised the most and least loved . And that has certainly delivered not the case for the last year or two , if overseas markets have significantly higher yields than the U.S. market .
Nevertheless , investors should usually to recommend a bit more thought to the routine 10 -15 % of their portfolio in the rule for foreign investment. Just avoid the latest hot fund the International Quarter ... each Quarter!
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Duncan Ellis is an author and retired stockbroker. He has worked both in the UK and the U.S. as a mediator. He specialized for many years in researching, trading and consulting U.S. investors in foreign securities. He runs the website specialist