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Getting Into International Investing
Diversification is an essential investing principle. It protects a portfolio from being seriously affected by negative events isolated to only a few stocks. In this article, we take a look at diversification that ventures into an international level, looking at its benefits and the different types of international investments available to the average investor. (To learn more, see The Importance Of Diversification.)
Why International?
Most investors tend to invest in what they know. This isnt necessarily a bad thing as its important to have a good understanding of your investments; however, it becomes detrimental when the blinders are put on and people refrain from learning about other investments. International investing, in particular, is a strategy sometimes overlooked by investors as a means of diversification.
With all the volatility found in stock markets, its difficult enough to pick winning stocks let alone winning economies. This is where diversification through international investing can help. Every year, the economic performance of a country will fluctuate and this undoubtedly affects the stock market. By buying securities in different markets as opposed to purchasing only U.S. stocks and bonds, you can reduce the impact of country or region-specific economic problems. (For more information, see Can You Learn The Stock Market?)
Take a look at the following chart:
Year Japan Nikkei
U.S. S
