209: Why Bother Investing Internationally?

Is it worth investing outside your home country given the risk? Should you hedge currency risk? What is the impact of Chinese "A" share listed companies being added to emerging market indices. More information, including show notes, can be found here.

Episode Summary

Should you be investing internationally? What are the benefits to having foreign stocks in your portfolio? Do the currency risks outweigh potential returns? On this episode of Money For the Rest of Us David considers these questions and more. Comparing different markets, understanding expected stock return projections, the benefits of hedging international stocks, and more are covered on this insightful episode – be sure to listen!

Why would anyone WANT to pursue investing internationally?

Many investors focus solely on domestic markets. Why? Because it’s familiar! They know historical market patterns and there’s no currency risk. Why then should you consider investing internationally? There’s one main reason – because your returns could be higher! To hear why investors are branching out into foreign markets, and some considerations you need to understand before taking the leap, be sure to listen to this episode.

This is why you can’t simply compare one country’s market to the next

When comparing international markets it’s essential to remember that you have to understand their differences in terms of sectors. For example, the US market is comprised of 26% tech stocks, while the world ex-US contains only 6.5% tech. The tech sector and its percentages in varying global markets is only one example why comparisons cannot be made simply. If you adjust your research to accommodate varying sector percentages, you can start to get an idea of which markets are more expensive than others – but these numbers are never set in s