Do you want to minimize risk in your retirement accounts? If so, consider diversifying your holdings to include foreign investments.
Investing internationally may boost your returns and minimize risk, as you’re “geographically diversified” and not relying on any single country’s economic performance. Geographic diversification can be achieved by buying foreign stocks, Exchange Traded Funds (ETFs), mutual funds, Real Estate Investment Trusts (REITs), and foreign corporate and/or governmental bonds. Find out more about minimizing risk in retirement by downloading The Retirement Planning Book for free at Profile-Financial.com.
Examples of global investment opportunities:
Foreign Stocks: Most stockbrokers can help you buy individual foreign stocks, taking care of any currency conversions if necessary. Even easier, though, would be to buy foreign stocks in the form of an “ADR” (American Depository Receipt). These investments trade like stocks in American dollars on U.S. exchanges but represent shares in foreign companies.
Exchange-Traded Funds: There are many ETFs that follow a variety of different foreign-based markets and sectors. They can be global, regional, or focused on a specific country. International ETFs may carry lower risk than individual stocks in specific foreign companies because they are diversified.
Foreign Real Estate: Buying real estate in foreign countries can be considered geographic diversification, but it usually requires a greater amount of investment capital than buying stock or mutual funds (i.e., you have to buy a whole property as opposed to just shares). To avoid the management hassles and complex tax obligations of owning physical real estate, consider buying international REITs (real estate investment trusts). Unlike owning physical property, REITs pay dividends, mitigate risk among several properties, and are more liquid investments because they often trade on the stock market.
Risks associated with foreign investments
While investing some of your retirement portfolio in international assets can hedge your portfolio against swings in your domestic economy, it’s certainly not risk-free. It’s important to remember that the added risks of currency and political uncertainties in other countries can impact your assets. Contact my office to review whether international investing makes sense for you, 02-624-2788.
Douglas Goldstein, CFP®, GFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published April 10, 2017. Updated February 2022