International Investing (2024)

International investing is the act of investing your money in foreign companies and markets to spread investment risk and take advantage of the potential for growth. Learn how to find new investment opportunities in Asia, Europe, and other global markets, to diversify your portfolio and more.

Guide to International Investing

International Investing (1)

What Are the Major World Stock Market Indexes?

Frequently Asked Questions

  • What is international investing?

    International investing is the act of investing your money in securities of companies or markets located in other countries around the world. International investing allows you to diversify your portfolio and take advantage of opportunities for growth.

  • What are the pros and cons of international investing?

    Diversification and growth are two pros of international investing, but the cons lie in the risks associated with foreign investments. You may not have access to information like you do with U.S. securities, there may be other costs and fees, you’ll likely have to work with a broker or investment advisor, and more. Consult a financial professional before taking part in international investments.

  • Which markets are open for international investing?

    You can invest in international markets around the world, including Asia, Europe, Latin America, Canada, and more.

  • How can you start investing in international stocks?

    You’ll need a brokerage account in order to begin investing in international stocks. Brokerage firms like Charles Schwab, Fidelity, Etrade, and more all offer investors access to international stocks. You can also invest in international stocks through mutual funds and exchange-traded funds (ETFs). Do your research before opening an account and only invest money you can afford to potentially lose.

Key Terms

  • Eurobonds

    Eurobonds are international bonds issued in a currency other than that of the issuer. Despite their name, eurobonds don't have to be given in euros. These bonds come in diverse forms.

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  • MSCI EAFE

    The MSCI EAFE is a popular stock market index that's commonly used as a benchmark for major international equity markets. Large and mid-cap companies from developed countries worldwide, excluding the U.S. and Canada, are included in the index.

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  • Fragile Five

    The Fragile Five is a group of countries that rely heavily on foreign investments for growth. The group that makes up the Fragile Five has shifted over time, but they all have certain traits in common.

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  • CAC 40 Index

    Similar to the Dow Jones Industrial Average in the United States, the CAC 40 consists of the 40 largest equities by market capitalization and liquidity. While the CAC 40 is almost exclusively French companies, their multinational reach makes it one of the most popular European indices for foreign investors.

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  • Exchange Rate Mechanism

    Exchange rate mechanisms, or ERMs, are systems designed to control a currency's exchange rate relative to other currencies. They are a key monetary strategy used by central banks.

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  • MSCI All Country World Index

    The MSCI All Country World Index (ACWI) is a market-cap-weighted global equity index that tracks emerging and developed markets. It currently monitors nearly 3,000 large- and mid-cap stocks in 47 countries.

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  • Dax 30 Index

    Germany's Deutscher Aktien Index, or DAX 30 Index, is a stock market index that consists of the 30 largest German companies trading on the Frankfurt Stock Exchange.

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  • Euro Stoxx 50

    The EURO STOXX 50 is a leading index of Europe's blue chip companies that is now a part of Qontigo, an investment intelligence company created by the Deutsche Börse Group. Similar to the Dow Jones 30 index in the U.S., the EURO STOXX 50 includes 50 blue chip stocks across 8 eurozone countries.

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  • TSX Venture Exchange

    The Toronto Stock Exchange (TSX) is like Canada's version of the New York Stock Exchange. In this manner, the TSX Venture Exchange (TSX-V) is like the NASDAQ Small Cap or OTCBB exchanges.

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  • CAPE Ratio

    The cyclically adjusted price-to-earnings ratio is a variation of the classic price-to-earnings ratio that attempts to provide better long-term guidance on how a stock price compares to the underlying value of the company.

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  • American Depositary Receipts

    An American depositary receipt (ADR) is a security that represents indirect ownership of shares of a foreign company that isn't directly traded on U.S. exchanges. American banks purchase the shares through their foreign branches. Then, they make them available to investors in the U.S.

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  • Vanguard Total International Stock Index

    The Vanguard Total International Stock Index fund provides broad- and low-cost exposure to non-U.S. stock markets around the globe. It includes developed as well as emerging markets, with thousands of equities in its portfolio.

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Explore International Investing

International Investing (2024)

FAQs

What is an international investment? ›

What is international investing? International investing is an investment strategy that involves selecting global investment instruments as part of an investment portfolio. People often invest internationally to expand diversification and distribute investment risk between markets and global companies.

Is it worth investing internationally? ›

Home-country bias leads investors to favor domestic securities despite potential global opportunities. U.S. stocks accounted for 44.9% of the global equity market capitalization in 2023. International stocks offer diversification, exposure to global growth and industry representation.

What are the risks of international investments? ›

These risks include currency exchange rate fluctuations, which can impact the value of investments when converting profits or dividends back into the investor's home currency. In addition, political and regulatory risks arise from changes in government policies or regulations that can affect investment returns.

What are the two 2 main types of international investments? ›

foreign direct investment (FDI) – where an investor sets up or buys a company (or a controlling share in a company) in another country, and; portfolio investment – where an investor buys shares in, or debt of, a foreign company without controlling that company.

Can I invest in international funds? ›

Investing in international mutual funds is the same as investing in any other equity mutual fund. The money is invested in rupees, and in return, units of the funds are allocated to investors. The fund manager takes the money and invests them in the stocks of companies that are listed on exchanges outside of India.

Why do investors invest internationally? ›

Foreigners have greater opportunities for higher long-term returns by investing in growing international markets. Emerging economies, in particular, often have higher growth potential than mature economies, offering attractive investment prospects for foreign investors seeking higher returns.

What are the cons of international investing? ›

But there are special risks of international investing, including:
  • Access to different information. ...
  • Costs of international investments. ...
  • Working with a broker or investment adviser. ...
  • Changes in currency exchange rates and currency controls. ...
  • Changes in market value. ...
  • Political, economic, and social events.

What is the highest performing international fund? ›

Best International Stock Funds
FundSymbol10-year average annual return
BNY Mellon Worldwide Growth APGROX10.27
MFS Global Growth AMWOFX9.63
BlackRock Unconstrained Equity InstlMAEGX9.21
Morgan Stanley Inst Global Sustain IMGQIX9.16
55 more rows
Mar 22, 2024

How much should I invest in international funds? ›

In general, Vanguard recommends that at least 20% of your overall portfolio should be invested in international stocks and bonds. However, to get the full diversification benefits, consider investing about 40% of your stock allocation in international stocks and about 30% of your bond allocation in international bonds.

What are the disadvantages of international finance? ›

Disadvantages of international finance

Political turmoil in one country which is a stakeholder of international trade can affect the other stakeholder of the same trade-in another country. Depending on other country's exchange rate is always risky given that all the currencies have significant volatility.

What is one disadvantage of overseas investment? ›

Disadvantages of Foreign Direct Investment

One of the main concerns is the potential for exploitation and loss of control by the host country. When a foreign company invests in a local business, it may have significant control over the operations and decision-making processes.

What are the cons of foreign investment? ›

Some potential disadvantages of foreign direct investment (FDI): The host country can lose control over its economy, and people may lose jobs if companies relocate production to lower-cost countries. There can be negative impacts on the environment from foreign investment in extractive industries.

How to do foreign investment? ›

An application can be made on the Foreign Investment Facilitation Portal (FIFP), which is a new online portal to facilitate FDI approvals for investors. This portal is administered by the Department of Industrial Policy and Promotion and the Ministry of Commerce and Industry.

What is an example of a global investment? ›

For example, you can invest in commodities in Australia, engineering space in Europe, or technology in the US market. You can also invest in various countries through ETFs. The global investment brings you the opportunity to invest in industry giants globally.

What attracts foreign investors to a country? ›

Freedom—political, legal, and economic—is a crucial factor in attracting FDI and fostering economic growth. As we've seen, regions with higher levels of freedom tend to receive more FDI, driven by strong legal frameworks, well-defined property rights, and transparent governance structures.

What is an example of a foreign investment? ›

An example would be McDonald's investing in an Asian country to increase the number of stores in the region. Here, a business enters a foreign economy to strengthen a part of its supply chain without changing its business in any way.

What is international direct investment example? ›

As mentioned above, an investor can make a foreign direct investment by expanding their business in a foreign country. Amazon opening a new headquarters in Vancouver, Canada would be an example of this.

What is an example of international portfolio investment? ›

Examples of foreign portfolio investments include stocks, bonds, mutual funds, exchange traded funds, American depositary receipts (ADRs), and global depositary receipts (GDRs). Foreign direct investment (FDI) refers to investments made by an individual or firm in one country in a business located in another country.

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