Investing Outside the U.S.

Opportunities in overseas markets can be yours with the guidance of our expert panel of money managers

well economically but has a lot of potential is Korea. They’ve had problems, and their consumers continue to battle with extremely high levels of debt. They’ve also struggled with the concern about the slowdown in China. Korean companies have been significant investors in China. And they have world-class companies that are well managed and produce products that are used around the world. Take Samsung Electronics, the preeminent manufacturer of consumer electronics and information technology products. If you think about the Samsung of 10 years ago, it made cheap products. Now they are an innovator. The brand awareness and the quality of the products has picked up on a global basis.

The other area that stands out is Japan. It’s been a market that has performed fantastically over the past year. The companies are, in terms of balance sheet strength, probably the strongest in the world, with 30% to 60% of the balance sheet being represented in cash. In terms of some of the underlying fundamentals, like profitability of the companies, return on equity, and return on assets, Japan is still well below what you could find in Europe and in the U.S., but they’ve improved over the last several ye
ars. So I think we have to pay more attention to Japan as we move forward.

BE: What are the risks when investing internationally, and what strategies can be used to take advantage of some of the hot markets?

RAMOS: You have to account for so many things as an international investor that you don’t have to worry about as much when you’re investing in U.S. companies. Starting with the emerging markets, there is everything from government involvement and meddling to the families that own a lot of these companies doing what’s in their best interest, not the interest of those investing in their company, and the macroeconomics of the country you’re operating in, whether it be inflation or interest rates. Political developments that take place in the countries also heighten risks. Dubious accounting in a lot of these companies makes it difficult to decipher what kind of information they’re disclosing or, just as importantly, not disclosing. If there’s nobody on Wall Street that covers the stock, you have to figure it all out for yourself and do your own financial statements. From a risk standpoint, I think investors should leave it to the professionals.

BE: In terms of strategy, should investors stick to mutual funds, or should they deal with a broker who knows international markets and do individual ADRs and stocks?

RAMOS: A lot of people rely on their brokers and, quite honestly, the brokers don’t follow international managers as closely as they follow domestic managers. They go with name brands oftentimes, so I would say rely on more objective measures like the Morningstar and Lipper rankings of international funds. I would say the best way to get international exposure is through mutual funds. In terms of percentages, depending on your age and the time frame of when you need the money, there’s

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