A Road Map for Investing Overseas
Foreign stocks look cheaper than U.S. shares. But keep expectations in check.
Traders at the Frankfurt stock exchange in Germany. PHOTO: REUTERS
Now would be an opportune time for investors to adopt a better foreign policy.
In the first quarter, U.S. investors poured $66.2 billion into mutual funds and exchange-traded funds that focus on stocks abroad, according to investment-research firm Morningstar, up from $37.9 billion in the same period a year prior. As of March 31, investors had nearly $2.7 trillion in foreign-focused funds, according to the Investment Company Institute, a trade group.
The investments are often paying off. Benchmark indexes in Australia, Brazil, Germany, Mexico and South Korea are among those that are outpacing the S&P 500 in 2015 after lagging behind the U.S. each of the past two years.
But just like tourists who talk too loud and visit sacred sites in beachwear, investors who venture abroad sometimes behave in ways they might not consider acceptable at home. Chasing hot performance and placing short-term bets don’t suddenly become solid strategies if you pursue them overseas.
Make sure you’re investing abroad for the right reasons, and with reasonable expectations about possible returns.
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