Investing in Foreign Companies
In our increasingly global economy, even as more Americans look overseas for their careers, more and more American investors are looking to foreign companies and foreign stock exchanges to help them grow their savings and prepare for retirement.
According to Investopedia, one of the reasons that foreign stock markets are so attractive to U.S. investors is that they tend to experience much more dynamic growth. The article claims that "the SETI 100 in Bangkok rose 117% in 2003, and Russia's RTS Index gained 72% in the first nine months of 2005." This could provide a potentially very high rate of return for investors.
However, the article also counsels against jumping into foreign markets with both feet before considering the risks. Your investment may be susceptible to different regulations than you are used to, and you may not always be able to obtain timely and accurate information about what your money is doing.
There are also fluctuating exchange rates to consider. Generally, it is best to withdraw money from your foreign investment when the U.S. dollar is weaker, since the foreign currency you are cashing out will have more oomph.
Here is a list showing the ten least risky countries to make investments in. Surprisingly, the U.S. does not even make the top ten.
If you are still interested in investing overseas, The Digerati Life can tell you how to do so. You may want to invest your money with a mutual fund, either foreign or domestic, that can direct your foreign business interests for you. This is especially advisable if you are new to investing in a given country.
Keep in mind, of course, that many American companies you could invest in have a strong global presence. So if you want to take advantage of an increased penchant for hamburgers in China, just invest in McDonalds.
You can also invest in Exchange Traded Funds that apply to foreign indexes, which work like mutual funds but are traded like stocks, according to The Digerati Life. This Wall-Street.com page has a useful list of links to different foreign stock exchanges, from Australia to Nigeria.
To increase your knowledge of foreign markets, read The Economist. Not only do they have market and currency data near the back of every issue, but their articles on the political and economic situations around the world are essential reading. Check out this graph comparing the GDPs of different U.S. states to the GDPs of different countries.