The rise of globalized markets has forced everyone to
become a global investor. If you're nervous about putting
your money to work overseas, though, there are several ways
you can ease yourself into international stock markets
without feeling like you're getting in over your head.
Reaching out for higher profits
Lately, the U.S. economy has fallen on hard times. Unemployment is pushing double-digit levels, and jobs are still being lost each month. The biggest contributors to growth in the country's gross domestic product
last quarter were various government stimulus programs, including Cash
for Clunkers and the tax credit for first-time homebuyers.
The impact of the problems the U.S. has faced recently has been felt around the world. But many countries, including emerging-market economies
like China and Brazil, have managed to sustain strong economic growth
despite the headwinds created by the global recession. Moreover, their
stock markets have seen huge successes recently. China's Baidu (Nasdaq: BIDU) and Netease.com have both seen explosive growth from March's lows, as have Brazilian giants Petroleo Brasileiro and Vale (NYSE: VALE).
Fear of flying
With the U.S. economy facing a questionable future while other countries around the world continue to leap ahead, you can't afford
to keep your money close to home. But many investors are understandably
nervous about investing abroad. Unlike investing in the U.S., foreign
stocks don't automatically give you the same protection that entities
like the SEC provide you here at home.
Moreover, many countries around the world don't have the same well-established commitment to capitalism that you find among developed countries. That can raise concerns of extraordinary events like nationalization of key industries and government confiscation of assets, which can cost you your entire investment.
That's why you might not want to jump into international stocks all
at once. To give you a sense of what it takes to be a global investor,
try out these three pieces of advice.
1. Let your stocks travel for you.
part of the global economy, you don't have to take a penny of your own
money overseas. Plenty of well-established U.S. companies earn a huge
portion of their overall revenue from abroad. Here are some examples:
Share of Revenue From Overseas
PepsiCo (NYSE: PEP)
Yum! Brands (NYSE: YUM)
Monsanto (NYSE: MON)
Cisco Systems (Nasdaq: CSCO)
Coca-Cola (NYSE: KO)
Source: Capital IQ, a division of
Standard and Poor's. *Does not include Canadian revenue. Coca-Cola
overseas revenue also excludes corporate division.
Moreover, many of these companies have a substantial presence
specifically in emerging markets. Yum! Brands got nearly 28% of its
revenue from China in 2008. Sun Microsystems attributed almost 16% of
its 2008 revenue to emerging markets.
2. Invest in who you know.
Conversely, plenty of foreign companies
do a huge amount of their business within the U.S., and the odds are
that you're familiar with many of their products. Whether it's the car
in your garage from Toyota Motor or scarfing down Crunch bars from Nestle, looking for names you already know well can make it easier to gain confidence with international investing.
3. Find a good fund.
It's easy to do
research on U.S. stocks by yourself. But given the barriers of
language, accounting systems, and other unfamiliar complexities, you
might prefer some help investing in international companies.
Plenty of mutual funds,
including both passive indexes and actively managed funds, can steer
you in the right direction. Be prepared to pay somewhat higher expenses
than you'll see with domestic funds because of the increased costs for
the fund of trading and maintaining global operations. But over time,
many funds have put together market-beating track records in the global markets.
Whichever way you do it, you need to become a global investor. By
looking beyond the nation's borders, you'll bring your portfolio into
the 21st century -- and you'll pave the way to enjoy the benefits of
the best investments the world has to offer.
© 2009 UCLICK, L.L.C.