7 Benefits of Investing Internationally

Foreign CurrencyWhen it comes to financial investments, it’s always better to go with an informed decision than one that relies merely on chance – besides, gambling only works when luck’s on your side. Fortunately, international investments are a financially secure and reliable form of investing as long as you know your limitations. So, in keeping with the idea of sound financial decisions, here are seven benefits of investing internationally:

Diversification of Your Funds

A diversified financial portfolio gives investors options in terms of economic fluctuations and, by investing internationally, your finances will have alternative sources of stability. In other words, if your money is spread out among various countries, then an economic crash in one country won’t affect other investments.

It goes without saying that with diversification also comes a learned understanding of various global economies and markets, but with the help of a financial adviser or with a little research, you’ll have the ability to make informed global investments, which is always better than the “eggs in one basket” approach.

Investing Abroad Means More Options

Just like there’s diversification with investing internationally, there are also many options when it comes to the way you want to invest your finances. And, with international investing growing in popularity, the investment options available in today’s market are quickly becoming commonplace.

Three of the most popular forms of international investments are mutual funds, exchange traded funds (ETFs), and American depository receipts (ADRs). And, although mutual funds are a common form of investment, ETFs and ADRs trade much like stocks and therefore take a little more financial knowledge to navigate.

International Protection and Confidentiality

If you’re the type of investor that’s worried about financial scares associated with foreclosures and lawsuits, investing internationally has an added advantage of asset protection. With investing abroad, many foreign financial institutions are able to protect your investments from seizure and other threats.

Likewise, investing internationally also comes with confidentiality concerning your finances. International financial institutions are not legally required to divulge your monetary details to anyone.  Confidentiality isn’t to say that international investments are exempt from legalities, but they’re entitled to more freedoms.

Investment Growth on an International Level

In terms of household incomes, import/export strengths, younger working populations, and the lean toward free-market economic policies, investing internationally has the potential for more growth than investing in the United States alone, which translates to an increase in return potential in overseas investments.

In fact, according to the International Monetary Fund, the United States is expected to fall below the rest of the world for the next two years when it comes to economic growth. Because of this, companies like Fisher Investments Institutional Group are strategizing toward international investments in strong economic climates across the world.

Currency Diversification Strengthens Portfolios

Much like international investing gives your portfolio safety in numbers as opposed to having all assets invested in one country’s economy, so do currency differences from country to country. In relation to the US dollar, many countries across the world have stronger currencies, which helps boost returns over time.

The flip side of this coin is the idea that fluctuations in currency strengths can just as easily work against your portfolio as they can strengthen it. It’s wise to keep an eye on international currency rates and how they compare to the US dollar, but never invest solely based on rates as a country’s currency can drop in strength overnight.

A Reduction in Taxes

Otherwise known as tax havens, many countries across the world offer attractive tax incentives to foreign investors. These incentives are meant to strengthen other country’s investing environments as well as attract outside wealth.

These tax incentives are particularly attractive to US investors due to the increasingly high taxes in the country. As a result, the United States government is creating more defined restrictions and laws when it comes to international investment tax incentive regulations.

Investment Potential in the United States is Dwindling

Because the United States has both the world’s largest economy and stock market, financial opportunities are almost maxed out due to over-investing. On the other hand, emerging markets in other countries are growing in size and strength, which is quickly resulting in stronger economies and more investment opportunities.

By ignoring the potential of other world markets, you’re also ignoring global economies and stock markets that offer unforeseen investment potential when compared to the United States, which is something every investor should keep in mind.

So, from portfolio diversification to investment growth, investing internationally is a great way to expand your financial horizons.

This is a guest post.

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My Investment Portfolio

I’m not a financial adviser.  I haven’t taken any of the classes or certifications that allow me to give investment advice.   Please don’t take this post as advice.

This is me, sharing what I have chosen to invest in.   These investments are scattered across a few different IRAs and brokerage accounts.  Copy me at your own risk.

BAC – Bank of America: I bought this low.  When any major bank is low, it’s time to buy.  I bought in stages starting at about $5 per share.  What I’ve got now has given me a 57% return.

CVS – CVS Caremark: I bought this on the advice of a friend.  It’s shown a 6% return over the past few months.

IAU & GLD – Gold ETFs: I wanted a way to get some precious metals into my IRA, so I bought a gold fund.  It’s down 7%, but I’m confident it’s going to come back.

MSFT – Microsoft:  This is one of the first stocks I bought with my 401k 10 years ago.  It’s up about 5% since I rolled it into my current IRA.

PAYX -Paychex Inc: I hate payday loans, but a friend recommended this stock and it has given me a 10% return.

SIRI –  Another recommendation from a different friend.  I don’t think it will ever hit the moon, but you won’t see me complain about the 60% return, either.

SLV – Silver ETF:  Another precious metals venture.  It’s down 3% overall, but that’s varying day to day.   A couple of weeks ago, it was around $19 per share, so it’s up nicely since then.  I predict it will continue to rise.

SYK: Stryker Corp: Another friendly recommendation.  This one is down 2%, but the recommender thinks it’s a good long-term bet, so I’ll hold it for a while.

VB – Vanguard Small-Cap ETF: I like Vanguard funds in general.  This one has given me a 5% return.

VIG – Vanguard Dividend ETF: This one pays dividends, which is usually a sign of a strong stock.  1% return.

VWO -: Vanguard Emerging Market ETF: If our economy has problems, emerging markets tend to thrive in response, so I’m hedging my bets with this.  It has lost 4% so far.

IDMOX – An ING family fund that has served me well.  13% return.

VFINX – Vanguard S&P index fund.  2% return.

RICK – Rick’s Cabaret: A few days ago, I read an article about Rick’s Cabaret losing a lawsuit that made all of it’s New York strippers into full employees entitled to minimum wage.  The article mentioned that Rick’s is publicly traded, which amused me, so I bought a few shares.

Those are the positions I have with one brokerage, across three accounts.   I didn’t share the balances, but overall, I have had a 10% return on these investments.

Now, I’ll share the contents of my wife’s inherited IRA.   This money was entirely in a money market when she inherited it last year.  She got nervous and would only let me play with half of it.  That half has averaged a 20% return since June 2012, with part of it hitting 29%.

These are all Fidelity funds for a specific 401k program.  I have no idea our accessible the funds are to the general public.  We are working on an IRA-mandated withdrawal of this money, so it will be moving over the course of years.

PYR INX LFC 2010/2035/2040/2045/2050 – These are targeted date funds.  Each of them has had at least a 20% return.

SM&MID Cap Equity – This fund currently has a 29% 1 year return.

That’s my investment portfolio.  Some gambles, some amusement, some solid investments.   I think I’m doing pretty well.  What do you think?

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