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Investing internationally, what to consider
Diversity. By spreading your investment risks throughout foreign companies and markets outside of the United States, you can diversify your portfolio. International investments can also be risky. If you are thinking about investing in foreign bonds or stocks, there are a few things you should consider.
In emerging markets, such as Jordan, Argentina, Brazil, or Mexico, the yields tend to be much higher because investors run a myriad of risks that are not present in developed countries, such as currency collapse to a government overthrow. Investments in developed countries such as Canada, Europe, Japan, and other countries where financial markets are relatively efficient and pose a lower risk. These bond yields are similar to yields in the US. Regardless of the investment type you choose, keep in mind that any form of foreign currency is subject to currency risk. Currency risk is the risk of loss of value in an investment because the currency in which the investment is denominated depreciates against your home currency. Currency risk results from fluctuating worldwide exchange rates, inflation, and interest rates. If you invest in foreign stocks, or in a U.S. based mutual fund company that invests in overseas companies, you face a certain level of currency risk. Know the company If you are investing in international mutual funds, you should also research as well. Things to consider include the countries where the fund invests and the types of investments it makes. The company itself. Many companies will publish annual reports, some in the English language. These can be an excellent resource. Investing internationally can be a great way to diversify your portfolio and get a higher return. Taking all risks into consideration before investing is important for maximizing your investments. |
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