Investing Outside the U.S.

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

an appropriate recommendation for everyone, but I tell people to have at least 25% in international.

MPARE: If you invest directly, use iShares, like iShares Japan or iShares Europe (www.ishares.com). That’s an easy way to get index exposure to the international markets without going to a mutual fund. But, again, if you go through mutual funds you gain active management. I think 10% to 25% of one’s portfolio should definitely be in the international markets, whether it’s Europe, Asia, Latin America, and certainly some participation in the emerging markets. Mutual funds serve the purpose, and most of the large companies like Fidelity and Alliance Capital all have international funds.

HOLT: I just want to point out that with risk, the door swings both ways. Currency risk is the greatest example. It’s been helping international markets, but it can also hurt international markets at some point.

I think it’s important to use a diversified approach to international investing. You should consider using mutual funds or at least a professional money manager as a way to help you manage risks. Look for a strategy that gives you access to a range of markets outside of the U.S. I would not exclude emerging markets. In terms of percentages, it depends on the profile of the investor, your risk tolerance, and how you will sleep at night with international investments–but 5% on the low end and up to 25% on the high end would be where the average investor should be positioned.

MIMS: Of course, we’ve talked about ADRs, a good way to go in Africa in particular. Also, we’ve identified about 165 publicly traded companies in Africa that have a market cap of at least $50 million. These companies are in banking, in brewing, telecommunications, housing, mining–very steady defensive companies that are going to be around. Looking at a three-year window, these are the companies that offer the most liquidity. For an investor to have 5% of their portfolio in Africa right now would be a good way to get a taste of things.

BE: Are there any other reasons why our readers should diversify their portfolios with international investments?

MIMS: Right now, Africa presents opportunities that existed in this country 30, 40 years ago. The African market cap is around $300 million. I believe that in five years it’s going to be over $1 trillion. The opportunities are there to amass a huge amount of wealth, as did the people who were in the U.S. market back in the 1920s or 1930s.

HOLT: I believe every investor should have a portion of their assets outside of the U.S. I encourage your readers to sit down with their investment adviser and come up with a strategy involving how much they want to invest–not if they will invest outside of the U.S.–then be committed to it.

MPARE: Anybody who is investing has to study and make sure that the decisions they make are consistent with the expectations of the returns they want to achieve. They have to have exposure to all

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