What do Nestle, Samsung, and Mitsubishi have in common?
They are large, well established, household names that are not US companies. Investing internationally allows an investor to take advantage of a broader market of opportunity. Today the United States represents close to 53% of the global investing opportunity. If investors are focused solely on US companies and US investments, they will be missing out on 47% of the opportunity in today’s the global economy. What if you were limited to investing in stocks that began with letters A through L? This question sounds absurd because you would be missing out on investing in many great companies, and limiting your pool of investment choices. By investing solely in US companies, you are similarly limiting your potential pool of investments.
At DirectAdvisors, we believe international investing is an important diversification tool for our retirement plan participants. Depending on your Risk Tolerance, we recommend 5% to 20% of a retirement plan participants’s portfolio should be invested internationally. These charts from Putnam Investments further illustrate this point, and the opportunity international investing presents.