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Foreign Stocks

Foreign stocks are units of ownership of publicly-owned corporations that are outside the United States.

Foreign stocks may be attractive to some investors, because:

  • They can allow investors to increase the diversification of their portfolio by placing a portfolio of their investments in that are less directly related to factors that influence returns on US stocks, which only represents 40-50% of the global equity market.
  • They can provide growth opportunities when investing in countries and regions with economies that are expected to grow at a faster rate than that of the United States
  • Take advantage of a greater universe of investment opportunities.

However, foreign stocks may have additional risks, including:

  • The exposure to currency risk
  • The exposure to political instability, which can result in the complete loss of principal or increased volatility of returns
  • Less developed capital markets and poor regulatory oversight, which may make investing more difficult, expensive, and risky.

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Glossary

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