Investing The World 'Round

If you want to diversify¹ your investment portfolio further, international stocks² may be an appealing option. While investing in stocks overseas has advantages and disadvantages, the potential for higher returns and greater portfolio diversification makes it a compelling consideration.

On the Plus Side

By tapping into the growth of emerging markets or the stability of established global companies, you may benefit from opportunities not available solely in U.S. markets. This diversification can also hedge against domestic economic downturns and currency risk.

On the Minus Side

Investing in international stocks comes with its own set of challenges. Political instability, currency fluctuations, and varying regulatory environments can introduce additional risk and complexity to your investment strategy. It's essential to thoroughly research and understand the geopolitical landscape and economic conditions of any country you're considering investing.

Avenues To Explore

When starting with international stock investments, you have several avenues to explore. One approach is to invest in American companies with overseas operations. Many well-known U.S.-based companies have substantial international exposure, allowing investors to participate indirectly in foreign market growth. Additionally, you might consider investing directly in foreign stocks traded on global exchanges. This option provides exposure to specific countries and industries that may not be well-represented in domestic stock markets.

Among individuals with more than $5 million in investable assets, nearly 50% are bullish on international stocks compared to 37% of those with less than $5 million.

Source: WSJ Intelligence survey, 2024

Another popular option for international stock exposure is through mutual funds and exchange-traded funds (ETFs)³ focused on global markets. These investment vehicles offer diversification across multiple international stocks and can be a convenient way to gain exposure to various countries and industries.

Taxes

Also, consider potential tax implications and foreign withholding taxes that could impact your investment returns.

Some countries impose withholding taxes on dividends and capital gains, which can affect the overall performance of an international investment. Your tax professional can provide guidance.

By carefully evaluating the options available with your trusted financial advisor, understanding the associated risks, and staying informed about global market conditions, you can decide whether investing in international stocks is right for you.

Hang Seng (HIS)

Represents 65% of the Hong Kong Stock Exchange, the most powerful in Southeast Asia.
Samples of Companies listed: HSBC,China Construction Bank, Industrial and Commerical Bank of China, and Bank of China

FTSE 100

Represents 80% of the total value of the London Stock Exchange.
Samples of Companies listed: HSBC, Royal Dutch Shell, and BP make up the bulk of this index

DAX 30

Represents German Stock Market, characterizes the state of the economy of its region.
Samples of Companies listed: BMW, Deutsche Bank, Allianz, Deutsche Post, Henkel

CAC 40

Represents Euronext Paris Stock Market.
Samples of Companies listed: L'Oreal, Renault, and Michelin

Euro STOXX 50

Represents 50 largest Eurozone Companies (France and Germany account for almost 70% of capitalization).
Samples of Companies listed: Deusche Post, Deutsche Bank, AXA, BMW, Siemens, and Volkswagon Group

Bovespa (IBV2!)

Represents San Paulo Stock Exchange, 50 of the largest blue chip companies in Brazil, a major macroeconomic indicator in Latin America.
Samples of Companies listed: Petrobras, Itau Unibanco, AmBev, Vale, and Telefonica Brazil

Source: WSJ Intelligence survey, 2024

¹Diversification cannot eliminate the risk of investment losses. Past performance won't guarantee future results. An investment in stocks or mutual funds can result in a loss of principal.
²The risks of investing internationally include changes in currency rates, foreign taxation, and differences in auditing and financial standards.
³Investors should read the prospectus and consider the investment objectives, risks, charges, and expenses of the fund before investing.
Because mutual fund values fluctuate, redeemed shares may be worth more or less than their investment. Past performance won't guarantee future results.