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Add Foreign Investments to Diversify Your Portfolio

One of the cornerstones of investing is diversity [3]. You are probably very aware of the importance of diversifying across asset classes, as well as diversifying across industries. Many people, though, overlook foreign investments when considering how they can add diversity to a portfolio.

This can be a mistake. Looking only to domestic investments can limit your investment portfolio and result in missed opportunities. Take a look beyond our borders. There’s a good chance that you can find some solid investments that can enhance your portfolio, and help you grow your wealth.

Foreign Investment Options

You have several options when it comes to foreign investments. As you might imagine, you can invest in foreign stocks and bonds. There are foreign companies that trade on U.S. exchanges — which can simplify matters. However, it is also possible for you to trade directly on foreign stock exchanges. Make sure you understand how this works before jumping in. Foreign bonds can also help you diversify your investments. In many cases, foreign bonds pay higher yields that Treasuries (including in emerging markets) — but that’s often because the risk of default is considered higher.

You don’t have to focus on individual stocks and bonds, though. Here are some other options for foreign investment:

Risks Associated with Foreign Investments

You have to realize, though, that there are risks that come with foreign investing. While all investment carries risk, there are a few things to take into consideration:

Bottom Line

You don’t have to go all the way to foreign markets to increase your diversity in this area. There are plenty of options available close to home — and in U.S. dollars — that can improve your portfolio. However, if you do decided to invest directly using foreign exchanges, make sure you understand the rules.

(Photo: ArchivalQuality [7])