December 7, 2014 Admin | December 7, 2014 Why is it important to diversify your investments beyond the shores of America? How?
3 thoughts on “December 7, 2014”
It is important to diversify your portfolio beyond America because then you will have a lower risk of loosing money. Some years American companies might do bad but if your diversified you will own stock in businesses in other countries that did good that year. You can own international stock by going to vanguard and buying it there.
It is important to diversify your investments beyond just one economy. If the US economy is doing poorly the Europium or emerging markets may be doing very well. If you hold stock from around the work an event in one part of the world will have less effect on you. You need to look past home county bias and hold a decent amount of over seas assets. You can own an emerging markets index or a total international stock or bond index at Vanguard to own the over seas assets that you want.
Great answers, gentlemen. Let’s review.
Investing overseas in an International Index Fund (developed countries like Germany, England, Canada, and Japan for example) or an Emerging Markets Index Fund (China, Taiwan, Russia, India, and Brazil for example) can offset the returns you receive from your U.S. investments.
When one is going up, another might be going down. This uses modern portfolio theory as you combine multiple risky assets into a portfolio that ultimately reduces your risk because they are negatively correlated to the other investments within the portfolio (they go up and down differently much of the time).
Vanguard.com offers many fine choices at very, very low costs (.14% for admiral shares on the International Index Fund and .15% on admiral shares on the Emerging Markets Index Fund). Seek out similar investments in your company retirement plan at work (almost focus on costs when doing so). Now go out there and take some risk!