An article I read earlier seemed to suggest that one should avoid "foreign" stocks like the plague because you'd probably be gambling your money away. But isn't stock trading all about taking measured risks? What if you can do better trading stocks say in India/foreign markets?
Just my two cents on this issue... Be aware that I don't know what the hell I'm talking about. Just came from a thread where smart people talk about "geographical diversification" like it's something important. Forbes thinks India will be nº 3 by 2020: http://www.forbes.com/sites/kenrapoza/2011/05/26/by-2020-china-no-1-us-no-2/ Of course, there's alot of shady stuff happening in India. I guess it's about doing your due diligence before investing. Let's wait, and see what smart people have to say about it.
I think with foreign stocks it is harder to stay in-tune with the day to day action, especially when you don't live there. Living in the US, with are exposed to most everything in the NYSE, and therefore have a lot more knowledge of the inner workings of the businesses. Of course there are some exceptions, but if you want to know how Chipotle is doing, head down to a local Chipotle and see how busy it is. It's a very primitive way to scout out potential stocks, but it allows for first hand knowledge.
Foreign is a subjective term. To me, everything in NYSE is foreign stocks. So according to your "expert" I would be purely gambling while investing there? Or maybe a more likely explanation is that your "expert" is one of those "Amurica #1 always and forever" idiots who hasn't realized that life exists outside of your borders. Honestly the best thing to learn from that article would be the authors name so you can ignore all of this future articles. Geographical diversification is extremely important, though you don't necessarily have to invest in foreign shares to get it. For example investing in Procter & Gamble already gives you quite a bit of global diversification as their products are being sold in over a hundred countries. But I definitely recommend that at some point of your investing career you look for opportunities elsewhere... not necessarily through individual stocks but at least think about getting an ETF that invests elsewhere.
Agree with Crimson. Most US companies have at least some foreign exposure. I do like to dabble overseas via ADRs (for foreign company stocks) and also via things like better emerging markets mutual funds. I'd limit these more direct "foreign investments" to a small amount of your portfolio.
Would it not be easier to be able to keep track of what is happening in your own country rather than going to other countries' companies? I also do not know exactly what I am talking about, but that just seems more ethical all around.
I don´t think it really matters ´foreign vs US´ or anything like that.. it is more important the size of the company and the country they mainly operate in. Mercedes Benz and Nigerian power and light are both foreign companies... Me personally, I think investing in developing countries is about the same as investing in penny stocks.. it is just a huge gamble with very little information available. The things I do not know about China and India is far greater than the things I know and understand. I am maybe too logicial, but unless I can get a good bit of information about a company, and I understand it´s business model... then I just avoid it. I do have 20% of my 401k going into an ´overseas fund´ but from what I have seen, most of the money is in big name companies which aren´t that much different than large US multinationals.
Speaking more from the institutional side, the Chinese market is really attractive as it continues to liberalize to some extent. One of the biggest issues affecting anyone trying to engage in high-frequency, or algo trading here is the latency that happens trying to connect through the great firewall. So if you're looking to trade in China it is better to focus on thing you can sit on a little, or commit 100% and set a up a presence here.
I am living in Austria and have experiences with German and Austrian stocks but not with ones who are from countries where I don't know the economical situation. In the end I think it does not depend on the country where the stocks or shares are from but it is important how good you understand the economy situation in this country and how involved you are in the situation and forecasts of the company (or companies) you want to invest in.
It's pretty hard to track everything that's going on, IMHO. For instance, in my country, the anti corruption officers have arrested a couple of big shareholders recently and the next day, BAM, the price of the stocks dropped down. My father lost about 10% of his investment in a local steel factory in just a few hours. This is why, at least until I am financially independent, I will only buy invest in index funds, bonds and blue chips from my country.
