Foreign Investing involves buying any kind of investment (stock, bond, real estate) of and issuer based outside of the USA, or for direct investments, for assets/companies based outside the USA.
Benefits of investing outside of the USA could include the following:
- Investing in relatively unknown, and therefore possibly undervalued investments
- Investing in markets where there exists potentially higher GDP growth and therefore potentially higher overall investment growth than the US
- Currency diversification
Some drawbacks could be:
- Government takeovers of industry or poor policy = Political risk
- Poor handling of the money supply/gov’t budget = Currency risk
- Demographics of a country not favorable to growth = Economic risk
- Sometimes lack full disclosure of corporate documents = company risk
And these pros and cons are just for stocks! We didn’t cover bonds, real estate, or anything else, but you get the idea. Because of the sometimes lack of disclosure or information, foreign investing means more due diligence is often required on investing overseas. Some countries of course, have disclosures as good as or better than the US. So let’s not say that all countries are like black boxes. However, if you are typically too lazy to do full due diligence on a US-based company, don’t even try on a foreign company because there is just so much more to know.
If you have any questions regarding foreign investing, feel free to contact us either by phone – 781.393.0021 or through a Quick Contact – we’d enjoy talking to you.
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