INVESTING OVERSEAS

Investing Overseas Has Become Volatile

Ten or 15 years ago, investing overseas was viewed differently. Back then retail clients would often use foreign stocks and bonds almost as a hedge against their domestic holdings. For instance, if the U.S economy and markets were under performing, it didn’t automatically equate to selling pressure being put on Japanese or European equities and debt.

Now, because of China’s surge and the more recent European debt problems, we have seen U.S. markets react to almost every news flash, which as you know, has made the broader averages more choppy and volatile than we have seen in some time.

However, investing overseas does have it’s advantages, and has history has shown us, some foreign stocks and bonds probably will revert back to showing different percentage returns than the domestic names that we follow here in America.

Here are a few tidbits to look at on investing overseas below:

DIVERSIFICATION- Some financial advisors recommend that clients hold any where from 5 to 15 percent of their assets in foreign investments. Keep in mind that the portion reserved for investing overseas could become higher as our economies become even more similar.

EMERGING MARKETS- Usually through mutual funds, investors have frequently chased high returns in speculative, potentially high growth countries in the past. This trend will obviously continue due to the difficulty and high costs of buying illiquid stocks in foreign countries.

ACCOUNTING PRACTICES- There has been much talk recently about the grey area that Chinese reverse merger stocks are in. Bob Pisani has frequently highlighted names that have used this loophole to circumvent the SEC’s IPO process. As a rule of thumb, you should never unload on these types of ideas, no matter how promising they sound. Increased due diligence should be used as well.

Check back for individual equity ideas for investing overseas.

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