Published August 2002

Investment opportunities don’t stop at U.S. border

Did you ever stop to consider where the everyday products you use come from? Whether you’re watching television, talking on a cell phone, making coffee, driving a car or performing dozens of other activities, you may be using goods that are manufactured outside the United States. As a consumer, you may find this mildly interesting. But as an investor, it should give you something to think about.

Although the fates and fortunes of U.S. companies dominate the business news, many foreign companies are good investment possibilities. But how do you find them? And is there anything special you need to know about buying shares of international stocks?

Actually, investing in foreign companies isn’t really that difficult, as long as you keep a few things in mind:

n Know the risks involved. You can find solid investment opportunities in strong foreign companies, but you also have to be aware of some special risks. A variety of factors — including political instability, currency fluctuations, economic climate, foreign taxes and differences in financial reporting standards — can affect your stock holdings. While you may not be able to predict these events, you can at least factor them in when making your investment decisions.

n Diversify. When you own U.S. stocks, you need to diversify — and diversification is no less important when you invest internationally. That’s why you may want to consider investing in mutual funds that own a variety of foreign stocks. You can choose a global stock fund, which invests in stocks of companies located around the world, including the United States, or you can pick an international equity fund, which invests in securities of companies located in developing markets outside the United States such as Western Europe, South America, etc.

When it’s time to choose a particular global or international mutual fund, don’t just settle for the first one you come across. Before you invest, compare a fund’s management experience, investment philosophy and total expenses with other global or international funds.

n Focus on a company’s fundamentals. When you invest in any stock — U.S. or foreign — you need to take a close look at the company’s fundamentals. Is its management stable? Is the company well positioned within its industry? Is the industry itself growing? When you can answer these types of questions, you’ll be in a better position to make an informed investment decision.

n Don’t “overweight’’ your portfolio with foreign investments. Foreign investments can be a valuable part of your diversified investment portfolio — but they probably shouldn’t make up too heavy a percentage of your overall holdings. Even if you’ve done your research on foreign stocks, they will always represent more of an “unknown’’ than U.S. stocks. In the investment world, the element of mystery or surprise is rarely a good thing.

Finally, you may want to seek out the assistance of an experienced investment professional. He or she can help guide you through the international investment scene, and hopefully, make your journey a pleasant one.

Eric Cumley is an Investment Representative with Edward Jones Investments at 1201-C SE Everett Mall Way in Everett. He can be reached at 425-353-2322. Edward Jones is an NYSE-member investment firm with more than 7,000 locations nationwide.

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