International Trading: Exactly Why This Method Is Sensible
Of the globe's 40000 publicly traded companies, seventy seven percent are situated abroad, a pretty good sign that you'll find compelling investment opportunities outside the United States.
Viewed another way, 51 percent of the world's $38 trillion total market capitalization belongs to the international arena. United States mutual funds hold $491 billion in international investments.
With so many potential investments outside the United States, investing internationally becomes an awesome way to diversify an equity portfolio. Some people contend that there is an increasing correlation in performance between the United States and international markets.
But even though world markets generally tend to react similarly to news reports or developments occurring around the globe, over time, international and domestic markets tend to behave differently, helping to smooth out the ride in a diversified portfolio.
Look at the performance of the Morgan Stanley Capital International Europe, Australia and Far East Index, which charts the progress of stocks in developed markets located in Europe, Australia along with the Far East, versus the S&P 500, considered representative of the broader United States stock market.
When one is going strong, the other has a tendency to lag behind, and that has been the case going back as far as 1970. Furthermore, if the MSCI EAFE outperforms the S&P 500, it has done so by a greater margin than when performances are reversed.
In fact, during the past 10 years, the United States stock market has never been the leader in the global investment arena. Top performance has been the exclusive domain of international indices during that time, and the returns of the S&P 500 occasionally have lagged those of overseas peers by wide margins.
Global funds invest about half in the United States and 50 percent in the rest of the world, making them a smart way for someone with little or no experience in international investing to test the waters. A great example is American Century Global Growth, whose managers scour the world for the best growth investment prospects for the fund's shareholders.
You should consider the fund's investment goals, risks, fees and expenses carefully before you invest. Find out what their views are on going public with a company by searching: companies go public or company go public.
The fund's prospectus, which can be obtained by calling or visiting American Century's Website, contains this and other information regarding the fund and should be read carefully before investing.
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