China accounts for roughly half of global e-commerce spending, and its online retail market looks poised for substantial long-term growth. The company is headquartered in South Africa and operates roughly 2, locations across 14 countries.
The company has more than 5, branches across more than 2, cities and towns. HDFC is also a player in the digital payments space and appears poised to benefit from the war on cash. Foreign markets present opportunities that you miss if your holdings are strictly limited to U. While nondomestic companies sometimes come with added risks, international companies tend to be cheaply valued relative to comparable businesses in the U.
Many investors prefer to pay more for domestic stocks because business growth in international markets is considered less reliable than growth in the U. But with the vast majority of global population growth in coming decades projected to occur outside of the U.
While the U. Even a country such as Poland, which is home to roughly 38 million people and has actually seen its population shrink in recent years, could expand its gross domestic product GDP at rates that significantly exceed the growth rate of the U.
Poland is benefiting from industrialization initiatives and a fast-growing tech sector, and, as with any economy with strong growth, likely creating conditions that benefit most Polish companies. Of course, domestic companies are working to expand their presence in international markets and should profit from global growth.
Investing in foreign stocks is a way to have a direct stake in growth outside the U. From growth stocks to large-cap stocks and beyond, there are many types of stocks to choose from.
Learn to make money by identifying value stocks, which are companies whose shares are being sold at bargain prices. The easiest and perhaps safest way for you to invest in foreign stocks is by investing in exchange-traded funds ETFs or mutual funds that include nondomestic companies. Some foreign companies list their stocks on U. The other main way to invest in foreign stocks is by using a brokerage to obtain direct access to the exchange where the company is listed.
A global account with a participating U. Your investment also is not protected by domestic securities laws, and you could face difficulty achieving restitution through a foreign court. While the rewards of investing in international stocks can be high, there are some risks to consider. Political instability in the country can devalue an investment, and the values of currencies fluctuate.
Particularly in emerging markets, you may have relatively poor visibility into a company's business operations. Foreign companies are more likely to fail to meet the communications and reliability expectations of most U.
One critical question for all stock investors is, what should my international exposure be? Unfortunately, here investors can be their own worst enemy.
This issue may end up hurting performance, or increasing risk, or both. On average, U. The basic problem is something called home bias. We like to hold what we feel comfortable with.
Often that means favoring domestic investments over international ones. The average U. That's not surprising, because the former are U. We see U. However, the revenues of Exxon and Shell are similar and the market value of Facebook of Tencent aren't that far apart.
Yet, someone who only invested in domestic companies would just hold such U. That matters from a diversification standpoint. It's not to say that domestic companies are better, or worse, than foreign ones.
Yet, by holding a broader set of companies you are unlikely to change your return, but may reduce your risk. Professor Lewis of Wharton has found that a well diversified global stock portfolio, can potentially either cut your risk by a few percentage points a year, or improve returns for the same level of risk as just holding U.
The exact numbers do depend on your assumptions and time periods, but this is about as close as you get in investing to a free lunch. It's the principle of diversification in action. Yet, many U. One positive is that global diversification does appear to be getting better for U. So international exposure is moving higher, but not especially fast. Benz: Hi, Susan.
It's great to be here. Dziubinski: Now, before we get into talking about asset mixes when it comes to foreign stocks, let's first talk a little bit about the performance of non-U. They didn't do particularly well in , and they have lagged for a little bit of time. So, what's the case for non-U. Benz: Right. Viewers are probably watching me saying, "Oh, here she is banging this drum again. But you're right, Susan, the U. That's an enormous differential.
So, it's certainly been hard to keep the faith. The key reason I would say, though, to sit tight is that we do typically see these things move in cycles.
Back in the '00s, for example, which feels like a distant memory, foreign stocks actually outperformed U. And valuations look a bit more attractive today. I typically do these surveys of investment firms of their capital markets' forecasts to affirm they have been calling for higher returns from foreign stocks than U.
Another factor in favor of foreign stocks, especially for dividend-hungry investors, is that yields tend to be a little higher, and there are simply some great companies domiciled outside of the U. So, those are some reasons that you want to stick tight, but I know it has been a pretty trying period.
Dziubinski: As a first step, if investors want to get their arms around what their current allocation is to non-U. Benz: They could start by looking at their dedicated foreign stock holdings and tallying them up as a percentage of their total portfolios.
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