Stocks of companies based in countries other than the home country of investors are called international stocks. Many foreign stocks trade on the US stock exchanges. They are registered in the US and help to diversify the investment portfolio, boost returns, and reduce volatility.
Although the global economy is interdependent, yet international stocks form an integral part of a well-rounded portfolio as risks and returns vary across the world. International stocks provide investors the opportunity to diversify their investment through variation in geography and industry, reduce volatility by protecting against risks specific to a particular geographical location, and boost returns.
Factors to Consider Before Investing in International Stocks
Many US investors still follow the home-market bias and invest in companies and stocks they know well. Investing in international stocks may seem uncertain and risky to investors due to different regulations and norms in different countries.
However, if investors consider all the relevant factors around foreign stocks, they serve as excellent additions to the portfolio. Investors must take sales growth, EPG growth, debt-to-equity ratio, and market capitalization into account before investing in international stocks. The overall yield or rate of return over the past five years or so is also a significant factor to be considered while adding the dividend metric to the selection process serves as an additional bonus.
Which International Stocks Should I Buy?
Stocks of companies located across the world trade on the US stock exchanges. We have aggregated a list of the best international stocks for you to choose from. Ideally, an investment portfolio should be made up of 40% international stocks to multiply returns and reduce volatility.
Investors can gain exposure to the international markets either through direct investment in international stocks or through investing in ETFs that follow international markets or investing in ADRs, GDRs, and mutual funds. Either way, international stocks add considerable diversification and value to an investment portfolio.