The sun never sets on over­seas in­vest­ment op­por­tu­ni­ties

Cape Breton Post - - BUSINESS -

For many Cana­di­ans, in­ter­na­tional in­vest­ing has meant, for the most part, in­vest­ing in U.S.-based com­pa­nies. Yet you only have to start your day with a cup of Brazil­ian cof­fee brewed in your Krups cof­fee maker be­fore head­ing to work in your Toy­ota or Honda to re­al­ize that a world of in­vest­ment op­por­tu­ni­ties ex­ists far be­yond North Amer­i­can bor­ders. And right now may be a par­tic­u­larly good time to con­sider send­ing some of your loonies over­seas. Con­sider the fol­low­ing:

Eco­nomic growth: You’re well aware that a se­vere re­ces­sion re­cently hit Canada, the U.S. and other world mar­kets. How­ever, some coun­tries’ economies con­tin­ued to grow, al­beit at a slower pace. In the world’s de­vel­op­ing mar­kets, growth prospects — and, con­se­quently, in­vest­ment pos­si­bil­i­ties — re­main at­trac­tive.

Ex­panded global in­vest­ment op­por­tu­ni­ties: In the past, the U.S. dom­i­nated the world’s in­vest­ment mar­kets, but that’s no longer the case. To­day, coun­tries out­side North Amer­ica hold two-thirds of the world’s stock mar­ket capitalization. And emerg­ing mar­kets — coun­tries such as China, In­dia, Brazil and Mex­ico, which are char­ac­ter­ized by younger, less ma­ture economies — have grown from 10 per cent of the world’s eq­uity (stock) value in 2003 to 24 per cent as of Oc­to­ber 2009. Fur­ther­more, the U.S fixed-in­come mar­ket rep­re­sents only about one-fourth of the global mar­ket, down from 56 per cent in 1982 — which means you now have a much wider se­lec­tion of bonds from which to choose.

Di­ver­si­fi­ca­tion: If you in­vest only in the Cana­dian and U.S. mar­kets, and a down­turn hits th­ese economies, your port­fo­lio will likely take a hit. But, as men­tioned above, in­ter­na­tional mar­kets don’t al­ways per­form ex­actly like the Cana­dian or U.S. mar­kets. Con­se­quently, if you ex­pand your in­ter­na­tional in­vest­ments be­yond the U.S., you can help di­ver­sify your port­fo­lio. While di­ver­si­fi­ca­tion by it­self can­not guar­an­tee a profit or pro­tect against loss, it can help re­duce the ef­fects of volatil­ity and give you more chances for suc­cess.

As you can see, you can gain some clear ben­e­fits by in­vest­ing in­ter­na­tion­ally. Yet th­ese po­ten­tial re­wards do not come without risks. For ex­am­ple, some parts of the world can ex­pe­ri­ence politi- cal in­sta­bil­ity. New gov­ern­ments can come in, na­tion­al­ize com­pa­nies, dras­ti­cally change poli­cies or rules af­fect­ing com­merce, or take other ac­tions that could af­fect your in­vest­ments. Also, in­ter­na­tional in­vest­ments may be af­fected by changes in the value of the loonie or the U.S. dol­lar rel­a­tive to for­eign cur­ren­cies.

Be­cause of th­ese ad­di­tional risks as­so­ci­ated with in­ter­na­tional in­vest­ments, when in­vest­ing out­side North Amer­ica you may want to con­sider in­vest­ing in mu­tual funds, whose in­di­vid­ual stocks and bonds are se­lected by port­fo­lio man­agers with the ex­pe­ri­ence and ex­per­tise nec­es­sary to nav­i­gate for­eign mar­kets and find growth op­por­tu­ni­ties among many coun­tries and com­pa­nies.

In any case, when you think about putting some of your money to work out­side Canada, don’t con­fine your­self to the United States. In­stead, con­sider tak­ing out a “pass­port” to the wide world of in­ter­na­tional in­vest­ing. Like all jour­neys through the in­vest­ment world, it may in­clude some de­tours along the way, but the po­ten­tial re­wards are well worth seek­ing.

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