In the world we can find some 40,000 publicly traded companies of which almost 80 percent are stationed overseas, and this is a good indication that there are interesting investment potentials outside the borders of the United States.
Looked at this in a different way, over 50 percent of the global $38 trillion overall market capitalization is owned by the worldwide arena, and American mutual funds keep nearly $500 billion in international investments.
With all these potential investments outside the U.S., international investments have become an excellent vehicle to diversify an equity portfolio. A number of people claim that there’s definitely a growing connection in performance between international and domestic markets.
But while international markets usually tend to react in the same way to news or developments taking place around the world, after a while, global and domestic markets have a tendency to behave in different ways, and this helps to keep the balance in a diversified portfolio.
These days, you even have better options and monitor new investing developments thanks to many (investor relations) IR apps.
Look into the results of the Morgan Stanley Capital International Europe, Australia and Far East Index, which charts the development of stocks in established markets situated in Europe, Australia and the Far East, versus the S&P 500, regarded as representative of the wider U.S. stock market.
When one is performing strong, the other is likely to lag behind, and that has been happening going back as far as 1970. Furthermore, when the MSCI EAFE outperforms the S&P 500, it has done so by a more significant margin than when performances are reversed.
Actually, throughout the last decade the United States stock market never was the leader in the international investment environment. Top notch results have been the specific domain of worldwide indices throughout that period, and the earnings of the S&P 500 occasionally have been considerably less than those of foreign rivals by vast margins.
International funds make their investments around 50 percent in the U.S. and the other half in other parts of the world, and that’s why they have become a clever way of investing for people with hardly any knowledge of global investments. American Century Global Growth is a pretty good example, and the fund’s managers keep an eye on the global market for the most beneficial investment options available for this fund’s investors.
If you want to invest globally, first check out a fund’s investment targets, the risks, fees and costs cautiously. The prospectus of a fund, which with American Century for example can be obtained via their website, contains this and much more information, and you always must read it meticulously before you will start investing.